The Federal Housing Finance Agency’s loan-level pricing adjustment changes, which took effect for loans delivered to Fannie Mae and Freddie Mac on or after May 1, 2023, redrew the risk-based fee grid that sets what you pay on a conventional mortgage.1Fannie Mae. Fannie Mae Lender Letter LL-2023-01 New Loan-Level Price Adjustment Framework The short version: fees dropped for many moderate-credit borrowers with smaller down payments, rose modestly for borrowers with top credit scores and large down payments, got steeper on cash-out refinances, and disappeared entirely for income-qualified first-time buyers. A further update to the matrix took effect January 28, 2026.2Fannie Mae. Eligibility and Pricing
What an LLPA Is, in One Paragraph
When a lender sells a conventional loan to Fannie Mae or Freddie Mac, the loan is priced from a grid that cross-references your credit score against your loan-to-value ratio, with layered adjustments for property type, loan purpose, and other risk factors. Lenders pass that cost to you, either as an upfront fee at closing or as a slightly higher interest rate. A rough conversion: each 1% in LLPA fees adds about 0.25% to your rate. On a $400,000 loan, that quarter-point difference is roughly $60 a month, or about $21,600 over 30 years.
What Changed in the 2023 Overhaul
Two structural shifts matter most.
First, the FHFA split the base pricing into separate grids by loan purpose. Purchase loans, rate-and-term refinances, and cash-out refinances now each have their own fee schedule rather than sharing one.3Federal Housing Finance Agency. FHFA Announces Updates to the Enterprises Single-Family Pricing Framework
Second, the grid added finer credit score tiers at the high end. Under the old framework, a 740 FICO put you in the top pricing bucket. The new grid pushes that ceiling to 780, so borrowers scoring 740 through 779 now sit a tier below the best pricing instead of at the top of it.4Fannie Mae. LLPA Matrix
The effective date is tied to when the lender delivers the loan to Fannie or Freddie, not when you applied or locked.1Fannie Mae. Fannie Mae Lender Letter LL-2023-01 New Loan-Level Price Adjustment Framework
Who Pays More and Who Pays Less
The redesign narrowed the pricing gap between lower-risk and moderate-risk borrowers. If you have a credit score roughly in the 660 to 720 range with a down payment of 5% to 15%, your LLPA fees dropped compared to the previous matrix. On a $400,000 loan, even a quarter-point fee reduction saves $1,000 at closing.
Borrowers with scores of 780 and above who put down 20% or more saw modest increases. A buyer with a 740 score and 15% to 20% down can expect a rate roughly a quarter of a percentage point higher than under the pre-2023 grid.
High-credit borrowers still pay dramatically less in LLPAs than lower-credit ones; the gap simply shrank. On the base purchase grid, a 780-score borrower putting 25% down pays 0%, while a 640-score borrower at the same LTV faces a fee well above 1%.4Fannie Mae. LLPA Matrix The claim that lower-credit borrowers now get better rates than high-credit ones is incorrect.
The DTI Fee That Was Rescinded
Alongside the matrix changes, the FHFA originally planned a separate LLPA tied to borrower debt-to-income ratio. After industry pushback, the agency delayed the fee in March 2023 and formally rescinded it on May 10, 2023.5Federal Housing Finance Agency. FHFA Announces Rescission of Enterprise Upfront Fees Based on Debt-to-Income DTI Ratio DTI still affects whether you qualify for a loan, but it does not trigger a separate pricing adjustment.
The Waiver Most Borrowers Miss
Before the main 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 (120% in designated high-cost areas), you pay zero upfront pricing adjustments on a purchase loan.6Federal Housing Finance Agency. FHFA Announces Targeted Pricing Changes to Enterprise Pricing Framework The waiver also applies to loans originated through Fannie Mae’s HomeReady program, Freddie Mac’s Home Possible program, and state Housing Finance Agency products.
A first-time buyer, in this context, generally means someone who hasn’t owned a home in the past three years. On a $350,000 loan that would otherwise carry 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.7Federal Housing Finance Agency. Setting the Record Straight on Mortgage Pricing
Cash-Out Refinances Got Hit Hardest
Cash-out refis carry the steepest fees under the new framework by a wide margin. Higher cash-out pricing actually took effect on February 1, 2023, ahead of the broader matrix overhaul in May.6Federal Housing Finance Agency. FHFA Announces Targeted Pricing Changes to Enterprise Pricing Framework At the same credit score and LTV, a cash-out refinance can carry LLPAs several percentage points higher than a purchase loan.
If you’re considering a cash-out refi, compare the all-in cost against a home equity loan or HELOC. Those products don’t run through Fannie or Freddie and aren’t subject to LLPAs, though they bring their own costs and typically carry variable rates.
When FHA or VA Beats the New Grid
If the new pricing hits you hard, government-backed loans use a different fee structure.
FHA
FHA loans charge a flat 1.75% upfront mortgage insurance premium regardless of credit score, plus an annual premium of 0.80% to 0.85% on most 30-year loans with more than 5% down.8U.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 can beat a conventional loan loaded with LLPAs and PMI. The catch: FHA mortgage insurance doesn’t automatically drop at 20% equity the way PMI does. On most FHA loans originated today, it stays for the life of the loan.
VA
VA loans have no LLPAs and no monthly mortgage insurance for veterans and active-duty service members. Instead, you pay a one-time funding fee: 2.15% of the loan amount for a first-time VA purchase with less than 5% down, 1.50% with 5% to 10% down, and 1.25% with 10% or more down. Veterans with service-connected disabilities and certain other eligible borrowers pay nothing.
What’s Next
The LLPA grid isn’t frozen. Fannie Mae’s pricing page lists an update effective January 28, 2026, and the industry continues to press for broader fee reductions.2Fannie Mae. Eligibility and Pricing A larger question sits in the background: Fannie Mae and Freddie Mac have been in government conservatorship since 2008, and policy discussions have revisited releasing them as publicly traded companies.9HousingWire. Mortgage Industry Backs LLPA Changes but Is Divided Over Priorities A privatized Fannie or Freddie would need to price risk for shareholders, which could complicate the cross-subsidization that currently funds the first-time buyer waivers.
For your own loan, the practical move is to ask the lender to show you the LLPA line on your specific scenario. The fees are disclosed, but they often sit buried inside the rate quote. A concrete number lets you compare lenders, weigh conventional against FHA or VA, and judge whether raising your credit score before you apply would actually move your costs.