Loan level adjustment rate is changing --- what that means for home buyers

A new plan to help low-income home buyers has some seeing red.

It makes the discount, usually given to those with a high credit score, harder to get. 

There has been a lot of anger over what some are calling a new fee, which will penalize those with high credit — making it more difficult to get the best interest rate on a home loan. 

"The higher the loan amount that certainly could end up costing you know, 80 dollars a month more to that borrower than it would previously," said Jeff Slater, CrossCountry Mortgage Executive, Vice President of the Chicago region.

Starting May 1, something called the loan level adjustment rate is changing.  Previously, if you had a credit score above 740, you could get the best interest rate in the house. 

Now? Not so much.


"Anyone with a credit score of 780 down to say 700 are seeing an increase in fees or interest rates that are going to be charged to them," said Slater.

How much more depends on the loan amount.

The adjustment does not affect new jumbo loans or first-time home buyers in Chicagoland who make $105,000 a year or less or any home buyer who makes 84 grand or less. 

You might be left asking yourself if now is a good time to buy a home. 

"If you find the perfect house, now is the time to buy instead of waiting, regardless of the interest rate or the loan level pricing adjustments you may fall within because most believe that in the near future, 12 to 18 months, there will be a refinancing opportunity to mitigate that higher payment," said Slater.

You might also be asking yourself why the government is changing these credit score guidelines now.

Speculation is that it's to prop the lenders up, making them more solvent in a turbulent market.