Here is something most first-time home buyers do not know: If your income falls within certain limits, you may qualify for a loan program that wipes out a chunk of those hidden costs entirely.
It’s called the LLPA waiver, and it can save you thousands.
What’s an LLPA?
LLPA stands for Loan-Level Price Adjustment. Think of it as a risk-based surcharge that Fannie Mae and Freddie Mac add to your loan. These factors include:
- Credit Score
- Down Payment
- Occupancy (Primary, Second Home, Investment)
- Property Type (Single Family, PUD, Condo, 2-4 unit)
- Loan Amount (Conforming vs High Balance)
- Purpose (Purchase, Rate/Term, Cash-Out)
These fees either get baked into your closing costs or pushed into a higher interest rate. If you’re a first-time homebuyer with a moderate income, the federal government has carved out an exemption that waives many of these fees entirely. Here’s how it works.
You qualify if:
- At least one borrower on the loan is a first-time homebuyer (meaning you haven’t owned a home in the last three years)
- Your household income is at or below 100% of the Area Median Income (AMI) where you’re buying
- Or, if you’re buying in a designated high-cost area, your income can go up to 120% of AMI
The AMI is just the middle income for the area you’re buying in. It changes by county and even by zip code. A $120,000 income might be too high in Tulsa but right in the sweet spot in San Francisco.
Not sure where you stand? Fannie Mae has a free tool called the Income Eligibility Lookup that lets you plug in an address and see the AMI limits. Your lender will use the same tool to confirm you qualify.
What Does the Waiver Actually Do?
If you qualify, the LLPA waiver removes those upfront risk-based fees from your loan. In practical terms, that means one of two things:
- Lower closing costs at the time you buy, or
- A better interest rate over the life of the loan
This is especially valuable if you have a lower credit score or a smaller down payment, because those are exactly the situations where LLPAs hit hardest. The waiver is essentially the government saying, “We don’t want fees designed for risk management to lock moderate-income buyers out of homeownership.”
One quick technical note worth flagging if you’re planning ahead. The AMI eligibility requirements fluctuate for each county and are subject to change every year. If you’re applying near a date when AMI limits change, the timing could affect whether you qualify.
The Bottom Line
If you’re a first-time buyer earning a moderate income, don’t assume you’re paying the same fees everyone else is. You might be sitting on a fee waiver worth thousands, which can be determined with a conversation with one of our licensed Mortgage Loan Originators.
