The loan level pricing adjustment changes that took effect in May 2023 recalibrated the risk fees Fannie Mae and Freddie Mac charge on conventional mortgages, narrowing the gap between credit tiers, adding a new top bracket at 780 and above, and eliminating fees entirely for qualifying first-time buyers. Because Fannie and Freddie back most conventional loans in the country, the shift shows up in almost every purchase and refinance quote, with further grid updates effective January 28, 2026.1Fannie Mae. Eligibility and Pricing
What an LLPA Is Before We Talk About the Changes
A loan level pricing adjustment is a risk-based fee charged when a lender sells a conventional mortgage to Fannie Mae or Freddie Mac. The fee comes off a grid that cross-references your credit score with your loan-to-value ratio, with extra adjustments layered on for property type, loan purpose, and other factors.
You pay it one of two ways. Either it appears at closing as a percentage of the loan amount, or your lender folds it into a slightly higher interest rate. A rough conversion: every 1% in LLPA fees translates to about 0.25% on your rate. On a $400,000 loan, a 1% LLPA is $4,000 upfront or roughly $60 more per month for 30 years, which works out to about $21,600 over the life of the loan.
What Actually Changed in the Grid
The FHFA restructured the pricing matrix along two main axes. It split the base grids by loan purpose, so purchase loans, rate-and-term refinances, and cash-out refinances each run off their own fee schedule.2Federal Housing Finance Agency. FHFA Announces Updates to the Enterprises Single-Family Pricing Framework It also added more granular credit score tiers at the top. Under the old grid, everyone with a 740 or higher landed in the same top bucket. The new grid pushes the ceiling to 780, so borrowers in the 740–779 range now sit in a middle tier instead of the best one.3Fannie Mae. LLPA Matrix
The DTI Fee That Never Happened
Alongside the redesign, the FHFA initially planned a separate LLPA tied to debt-to-income ratio. After industry pushback, the agency delayed the fee in March 2023 and formally rescinded it on May 10, 2023.4Federal Housing Finance Agency. FHFA Announces Rescission of Enterprise Upfront Fees Based on Debt-to-Income DTI Ratio Your DTI still matters for approval, but it does not trigger a separate pricing hit.
Who Pays More and Who Pays Less
The redesign deliberately narrowed the pricing gap between lower-risk and moderate-risk borrowers. If your credit score falls in the 660–720 range and you’re putting down 5% to 15%, your LLPA fees dropped compared to the old matrix. On a $400,000 loan, even a quarter-point fee reduction saves $1,000 at closing.
The other side of that: borrowers with scores of 780 and above who put down 20% or more saw modest increases. A borrower with a 740 score and a 15–20% down payment can expect a rate roughly a quarter of a percentage point higher than under the pre-2023 framework.
High-credit borrowers still pay far less in LLPAs than lower-credit borrowers. A 780-score borrower putting 25% down pays 0% on the base purchase grid, while a 640-score borrower at the same LTV faces a fee well above 1%.3Fannie Mae. LLPA Matrix The claim that lower-credit borrowers now get better rates than high-credit borrowers is wrong. The gap just shrank.
The First-Time Buyer Waiver Most Borrowers Miss
Before the main grid overhaul, the FHFA eliminated LLPAs entirely for certain first-time homebuyers. If your household income is at or below 100% of the area median income, or 120% in designated high-cost areas, you pay zero upfront pricing adjustments on a purchase loan.5Federal Housing Finance Agency. FHFA Announces Targeted Pricing Changes to Enterprise Pricing Framework The same waiver applies to loans through Fannie Mae’s HomeReady program, Freddie Mac’s Home Possible program, and Housing Finance Agency loan products.
This is where borrowers most often leave money behind. On a $350,000 loan that would otherwise face a 1.5% LLPA, the waiver eliminates $5,250 in fees. The FHFA has said these targeted eliminations are funded by higher fees on second-home purchases and cash-out refinances, not by charging other primary-residence buyers more.6Federal Housing Finance Agency. Setting the Record Straight on Mortgage Pricing
Cash-Out Refinances Took the Biggest Hit
The separate grid for cash-out refinances carries the steepest fees by a wide margin. The FHFA implemented higher cash-out refinance fees starting February 1, 2023, ahead of the broader matrix overhaul in May.5Federal Housing Finance Agency. FHFA Announces Targeted Pricing Changes to Enterprise Pricing Framework The same borrower will face LLPAs several percentage points higher on a cash-out refi than on a purchase loan with identical credit and LTV.
If you’re considering pulling equity out, compare the all-in cost against a home equity loan or HELOC. Those products don’t go through Fannie or Freddie and aren’t subject to LLPAs, though they carry their own costs and usually variable rates.
When a Government-Backed Loan Comes Out Cheaper
If your credit score or down payment would trigger steep LLPAs on a conventional loan, the fee structures on FHA and VA loans work differently and are worth pricing out.
FHA Loans
FHA loans charge a flat 1.75% upfront mortgage insurance premium regardless of credit score, plus an annual mortgage insurance premium of 0.80% to 0.85% for most 30-year loans with more than 5% down.7U.S. Department of Housing and Urban Development. Appendix 1.0 Mortgage Insurance Premiums For a borrower with a 660 score and 5% down, that flat structure often beats a conventional loan loaded with LLPAs and PMI. The tradeoff: FHA mortgage insurance doesn’t drop off at 20% equity the way PMI does. On most FHA loans originated today, it lasts the full loan term.
VA Loans
VA loans carry no LLPAs and no monthly mortgage insurance. You pay a one-time funding fee instead. For a first-time VA purchase with less than 5% down, the fee is 2.15% of the loan amount. It drops to 1.50% with 5–10% down and 1.25% with 10% or more. Veterans with service-connected disabilities and certain other eligible borrowers pay no funding fee at all.
What’s Coming Next
The framework keeps moving. Fannie Mae’s pricing page lists updates taking effect January 28, 2026, so the matrix continues to be refined.1Fannie Mae. Eligibility and Pricing A larger question sits in the background: the possible privatization of Fannie Mae and Freddie Mac. Both have been in government conservatorship since 2008, and recent policy discussions have revisited the idea of releasing them as publicly traded companies.8HousingWire. Mortgage Industry Backs LLPA Changes but Is Divided Over Priorities Privatization would force the enterprises to price risk to satisfy shareholders, which could unwind the cross-subsidization that currently makes homeownership cheaper for lower-income first-time buyers.
Until then, the practical move is to ask your lender for the LLPA breakdown on your specific scenario. The fees are disclosed but often buried in the rate quote, and knowing the number gives you something concrete to compare across lenders, across loan types, and against the effect of nudging your credit score into the next tier before you apply.