Good question. Loan pricing is determined in part by LLPAs (which is short for Loan Level Price Adjustments) that the agencies (Fannie and Freddie) put out. They are designed to compensate for various risk factors, including loan to value, property type, occupancy, and credit scores. Here’s a great piece from Mortgage News Daily on it: http://mbslive.mortgagenewsdaily.com/knowledgebase/articles/295879-spring-2014-llpa-and-amdc-changes-comparative-tab
Note that the increases proposed (which were supposed to take affect for loans delivered after March 31st) have been delayed, so the first table shows the correct pricing adjustments. A 730 borrower who puts 5% down will incur a cost (LLPA) of .5% to his loan pricing, versus a .25% cost for a 740+ borrower. It’s important to note that these are adjustments to the PRICING, not the RATE of the loan.
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