Key Takeaways
- LLPAs adjust rates based on credit score and down payment size.
- Fannie Mae and Freddie Mac mandate LLPAs for conventional loans.
- LLPAs don't apply to FHA, VA, or USDA loans.
- Some programs offer LLPA waivers for first-time or lower-income buyers.
Article Summary
Loan-level pricing adjustments (LLPAs) are risk-based fees on conventional mortgages that adjust your interest rate based on credit score, down payment, occupancy, and other borrower characteristics. They are mandated by Fannie Mae and Freddie Mac.
What Are Loan-Level Pricing Adjustments?
Loan-level pricing adjustments, or LLPAs, are risk-based fees on a conventional mortgages. Like auto insurance, LLPAs raise mortgage costs for borrowers who are higher-risk because of their credit score, down payment size, occupancy, or any of eight total categories.
LLPAs are not closing costs. They are mandated fees from Fannie Mae and Freddie Mac which, in turn, are passed down to customers. LLPAs do not apply to FHA, VA, or USDA mortgages.
LLPA Quick Facts
- Most conventional loans use loan-level pricing adjustments (LLPAs).
- LLPAs are not used for FHA, VA, or USDA loans.
- Lenders calculate LLPAs based on risk factors like credit score, loan-to-value ratio (LTV), occupancy, property type, and loan purpose.
- LLPAs are usually included in your mortgage rate, but sometimes may be charged as a closing cost.
- Some first-time and lower-income buyers, as well as certain special programs, may qualify for LLPA waivers.
The 8 Loan-Level Pricing Adjustment Categories
A conventional mortgage's LLPA is the sum of 8 specific risk adjustments and, in this way, LLPAs work a lot like auto insurance. Just like a higher-risk driver will pay more to insure their car, a higher-risk borrower will pay more to get their loan.
LLPAs can be paid as discount points, but, usually, they're absorbed right into mortgage rates.
The unofficial LLPA/mortgage Rate exchange rate is roughly 1.00% LLPA → +0.25% mortgage rate but it's a conversion that fluctuates with markets and lock terms. Ask your lender what you can expect.
Also, loan-level pricing adjustments are cumulative, which means they add up. To find your final LLPA, add up every risk-based price that applies to you and your mortgage. The sum is your LLPA.
Test your mortgage for LLPAs → The World's Best LLPA Calculator.
Here are the 8 risk factors in the Fannie Mae / Freddie Mac LLPA calculation:
1. Credit Score and Down Payment
Fannie Mae and Freddie Mac start their LLPA calculations using a FICO/LTV matrix. The base-rate, starting LLPA is where credit score and loan-to-value meet in the Fannie Mae and Freddie Mac LLPA matrix. Generally, higher credit scores and lower LTVs result in a lower adjustment but not always.
The FICO/LTV matrix is for loan terms greater than fifteen years, including 30-year mortgages. The matrix does not apply to 15-year loans.
Examples: Selected LLPAs by Credit Score and LTV (Purchase)
| Credit Score | LTV | LLPA (%) | Effect On Mortgage Rate |
|---|---|---|---|
| 780 | 75% | 0.000% | +0.000% |
| 740 | 90% | 0.750% | +0.125% |
| 620 | 97% | 1.750% | +0.375% |
2. Occupancy Type
The second risk factor in the LLPA calculation is occupancy type.
Borrowing for a primary residences is the baseline risk so no LLPAs adjustments get made. There is no LLPA for a primary residence.
Second homes, however, do get an LLPA. Second home delinquency rates exceed primary home delinquency rates, which is why second homes get an LLPA adjustment. Same for investment properties. Of all the occupancy types, investment properties are most likely to go into default which is why investment property LLPAs are the highest of the three.
Notable: In keeping with its mission to make homeownership affordable for Americans, Fannie Mae and Freddie Mac raised second home and investment property LLPAs in 2023 and 2024, discouraging speculative home-buying.
Examples: Occupancy Type LLPA Adjustments (Purchase)
| Occupancy Type | LTV | LLPA (%) | Effect on Mortgage Rate |
|---|---|---|---|
| Primary Residence | 80% | +0.000% | +0.000% |
| Second Home | 80% | +3.375% | +0.875% |
| Investment Property | 80% | +3.375% | +0.875% |
Because occupancy type affects your loan pricing and terms, lenders may ask you to certify your occupancy plans in writing. Generate an occupancy affidavit letter →
3. Property Type
The third LLPA risk is property type.
Single-family homes are baseline risk so no adjustments apply for buyers of detached, 1-unit homes.
Condos are the next risk-level up. If a building has problems or the homeowners association struggles, it can affect every owner in the complex. It's difficult for Fannie Mae or Freddie Mac to recover their loss when condos go wrong. LLPAs apply at most, but not all, LTVs.
2-4 unit properties are also higher risk. Owners may rent out some or all of the units, but if a tenant moves out unexpectedly or repairs are needed in the home, it can be harder for owners to keep up with their loan. As with condos, LLPAs apply at most LTVs, but not all.
The largest property-based LLPAs are linked to manufactured homes. Manufactured homes can be harder to sell when an owner stops making payments, so additional risk-based pricing is assessed.
Examples: Property LLPA Adjustments (Purchase)
| Property Type | LTV | LLPA (%) | Effect on Mortgage Rate |
|---|---|---|---|
| Detached Home | 75% | +0.000% | +0.000% |
| Condo | 75% | +0.125% | +0.125% |
| 2-4 Unit Property | 75% | +0.375% | +0.250% |
| Manufactured Home | 75% | +0.500% | +0.250% |
4. Loan Purpose
Loan purpose is the fourth LLPA risk with conventional mortgages.
Purchase mortgages are baseline risk so no adjustments apply.
Limited cash-out refinances are the next risk-level up. Commonly called a "rate-and-term refinance", limited cash-out loans are popular in falling rate environments. LLPA adjustments are often small.
Cash-out refinances have the highest LLPAs. Lenders face more risk when homeowners take cash out because debt loads increase, LTV rises, and uses for cash can't be tracked. Adjustments are especially large for lower-end credit scores.
Examples: Loan Purpose LLPA Adjustments (FICO = 700)
| Loan Purpose | LTV | LLPA (%) | Effect on Mortgage Rate |
|---|---|---|---|
| Purchase | 80% | +0.000% | +0.000% |
| Limited Cash-Out Refinance | 80% | +0.500% | +0.125% |
| Cash-Out Refinance | 80% | +3.250% | +0.875% |
5. Loan Size
The fifth LLPA risk is loan size.
Mortgage loans that fall within national conforming loans are baseline risk. In 2025 , there are no adjustments on loans under $806,500 for a 1-unit home. In high-cost areas, loans over that amount are assessed a high-balance adjustment.
Examples: Loan Size LLPA Adjustments (90% LTV)
| Loan Size Type | LTV | LLPA (%) | Effect on Mortgage Rate |
|---|---|---|---|
| Conforming Loan Size | 90% | +0.000% | +0.000% |
| High-Balance Fixed-Rate | 90% | +1.000% | +0.250% |
| High-Balance ARM | 90% | +2.500% | +0.625% |
6. Private Mortgage Insurance Coverage
Mortgage insurance coverage is the sixth LLPA risk.
Standard mortgage insurance coverage is baseline risk. It's the more common form of private mortgage insurance (PMI) with conventional loans. There are no LLPAs associated with standard mortgage insurance coverage.
Sometimes, mortgage applicants have an option to accept "minimum MI coverage", which reduces PMI premiums. Instead of paying standard rates, buyers and refinancing households can get a discount in exchange for paying an LLPA.
Talk to your lender about your choices and which path could benefit you most.
Examples: PMI LLPA Adjustments (97% LTV)
| Loan Size Type | FICO | LLPA (%) | Effect on Mortgage Rate |
|---|---|---|---|
| Standard PMI Coverage | 700 | +0.000% | +0.000% |
| Minimum PMI Coverage | 700 | +1.250% | +0.375% |
7. ARM Structure
The seventh LLPA risk is the variability of your interest rate: fixed-rate vs adjustable-rate mortgage.
Fixed-rate mortgages are the baseline risk. There are no LLPAs for choosing a fixed-rate loan. You and your lender know exactly what your rate will be throughout the life of the mortgage.
ARMs are generally LLPA-free, too, except at specific LTV bands.
Examples: Fixed vs ARM LLPA Adjustments
| Amortization Type | LTV | LLPA (%) | Effect on Mortgage Rate |
|---|---|---|---|
| Fixed-Rate Mortgage | 90% | +0.000% | +0.000% |
| Adjustable-Rate Mortgage | 90% | +0.250% | +0.125% |
8. Subordinate Financing
Subordinate financing — when you have a second or third lien on your home — is the 8th LLPA risk.
When you have one mortgage and no subordinate lien, that's the LLPA baseline and no LLPA is assessed. However, when you use two or more mortgages to purchase or refinance a home, such as a conventional mortgage and a HELOC, LLPA rules apply.
Talk with your lender about how a HELOC or home equity loan affects your payments. Splitting your mortgage into a first and second lien can help you avoid PMI, but the resulting risk-based pricing could offset some of those savings.
Examples: Subordinate Financing LLPA Adjustments
| Amortization Type | LTV | LLPA (%) | Effect on Mortgage Rate |
|---|---|---|---|
| No subordinate lien | 95% | +0.000% | +0.000% |
| Subordinate lien (Purchase) | 95% | +1.875% | +0.375% |
| Subordinate lien (Rate-Term Refinance) | 95% | +1.875% | +0.375% |
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LLPA Credits and Adjustments
Not all LLPA adjustments increase your costs — some LLPAs reduce or even eliminate them.
Affordable housing programs like HomeReady® and Home Possible®, for example, cancel out LLPAs when you qualify for their program. Same for mortgages where the borrowers' qualifying income is below the home's area median income.
When you cancel out LLPAs, your LLPA is 0.00%.
Buyers also may qualify for cash credits toward costs based on specific mortgage features.
- $500 credit for completing housing counseling for HomeReady®
- $500 credit for using the HomeStyle® Energy program
- $500 credit for loans on certain HomePath® properties
- $2,500 credit for HomeReady loans to very low-income purchase borrowers where at least one borrower is a first-time homebuyer
Your lender will confirm whether your loan qualifies for any LLPA credits, waivers, or special exemptions.
How To Calculate Your Total LLPA
Loan-level pricing adjustments are cumulative, which means they add up. The total LLPA on a mortgage is the sum of all the adjustments that apply to that loan.
Think of it like building blocks: start with your base LLPA using the FICO/LTV matrix, then add adjustments for each risk factor thereafter.
- Start with base LLPA from credit score and LTV grid
- Add loan purpose adjustment (purchase, refinance, cash-out)
- Add rate type adjustment (fixed vs ARM)
- Add occupancy adjustment (primary, second home, investment)
- Add property type adjustment (single-family, condo, multi-unit)
- Add loan size adjustment (standard vs high-balance)
- Add subordinate financing adjustment (none vs HELOC)
- Add mortgage insurance adjustment (standard vs minimum)
With your final LLPA in hand, you can ask your lender to price the scenario in two ways: (1) Add your LLPA directly into the rate, and (2) pay your LLPA as discount points at closing using cash, lender credits, seller credits, or a combination of all three.
Check your mortgage for LLPAs → The World's Best LLPA Calculator.
Here are some examples of cumulative LLPAs in action.
Homebuyer with 760 FICO making a 90% purchase
| LLPA Category | Loan Trait | LLPA Adjustment |
|---|---|---|
| Credit Score & LTV | +0.750% | +0.750% (Base LLPA) |
| Loan Purpose | Purchase | +0.000% |
| Rate Type | Fixed | +0.000% |
| Occupancy | Primary Residence | +0.000% |
| Property Type | Single-family | +0.000% |
| Loan Size | Standard | +0.000% |
| Subordinate Financing | None | +0.000% |
| Mortgage Insurance | Standard | +0.000% |
| Total LLPA | +0.750% |
Homebuyer with 700 FICO doing a 70% cash-out refinance of a 2-unit
| LLPA Category | Loan Trait | LLPA Adjustment |
|---|---|---|
| Credit Score & LTV | 700 FICO, 70% LTV | +0.750% (Base LLPA) |
| Loan Purpose | Cash-out Refinance | +0.750% |
| Property Type | 2-unit Property | +0.750% |
| Occupancy | Primary Residence | +0.000% |
| Loan Size | Standard | +0.000% |
| Mortgage Insurance | Standard | +0.000% |
| Rate Type | Fixed | +0.000% |
| Subordinate Financing | None | +0.000% |
| Total LLPA | +2.250% |
Homebuyer with 640 FICO doing a 97% HomeReady® purchase
| LLPA Category | Loan Trait | LLPA Adjustment |
|---|---|---|
| Credit Score & LTV | 640 FICO, 97% LTV | +3.500% (Base LLPA) |
| Loan Purpose | Purchase | +0.000% |
| Property Type | Single-family | +0.000% |
| Occupancy | Primary Residence | +0.000% |
| Loan Size | Standard | +0.000% |
| Mortgage Insurance | Standard | +0.000% |
| Rate Type | Fixed | +0.000% |
| Subordinate Financing | None | +0.000% |
| Total LLPA | +0.000% (Waived) |
Recent & Notable LLPA Changes
DTI-Based LLPA Removed
In 2023, Fannie Mae and Freddie Mac briefly added a loan-level pricing adjustment based on a borrower's debt-to-income (DTI) ratio. Home buyers with higher DTI ratios paid extra fees. The change was rolled back quickly and is no longer in effect. If you're hearing about a DTI-based mortgage fee, therefore, know that the rule was repealed and does not affect new loans.
Temporary LLPA Waivers for Lower-Income Households
Starting in 2024, the agencies expanded waivers and credits for first-time buyers whose income falls within certain area median income (AMI) limits. Buyers earning less than the local AMI are temporarily eligible for full or partial LLPA waivers.
Use our Income Limits calculator to see if you earn too much to qualify based on where you live.
Second Homes and Investment Properties
In 2024, Fannie Mae and Freddie Mac changed loan-level pricing for second homes and investment properties, which are now much more expensive to finance than primary homes
The change aligns with the FHFA’s goal of promoting affordable homeownership. By making conventional mortgages less viable for vacation homes and rentals, Fannie Mae and Freddie Mac allow private mortgage lenders to fill that part of the market instead.
Matrix Updates and Why They Matter
Fannie Mae and Freddie Mac update their LLPA matrices regularly. Always ask your lender for the current LLPA matrix and check whether you qualify for any waivers or credits.
Practical Strategies to Reduce LLPAs
- Level up your credit score band. Even a small bump can drop you into a better grid cell.
- Nudge the LTV bucket. Gifts, seller credits, or a slightly larger down payment can move you to a lower-LLPA column.
- Property decisions. If you’re on the fence between a condo and a townhome, or 2-unit vs 1-unit, price both.
- Loan purpose. Avoid cash-out when you can meet your goal another way.
- Program match. If you’re eligible for HomeReady®/Home Possible® or first-time buyer AMI waivers, the pricing relief can be substantial.
- Compare across loan types. If LLPAs push conventional too high, price FHA/VA/USDA alternatives.
Frequently Asked Questions About LLPAs
Detailed answers on how matrices work, when waivers apply, and what to ask your lender.
What is an LLPA?
A loan-level price adjustment (LLPA) is a risk-based fee applied to conventional loans by Fannie Mae and Freddie Mac. LLPAs vary based on factors like credit score, loan-to-value (LTV), occupancy, property type, and loan purpose.
Do LLPAs show up as a line item at closing?
Not usually. Most lenders convert LLPAs into your interest rate. Instead of a separate fee, you'll see a slightly higher rate if your loan carries LLPAs.
Who is affected by LLPAs?
Most conventional conforming mortgages sold to Fannie Mae or Freddie Mac. Government-backed loans (FHA, VA, USDA) do not use LLPAs.
Are there waivers or credits?
Yes. First-time home buyers with qualifying incomes (≤100% of area median income, or 120% in high-cost areas) can get LLPA waivers under HomeReady® or Home Possible®. Other affordable housing or special program loans may also receive reduced LLPAs.
Can I reduce my LLPA?
You can lower LLPAs by improving your credit score, making a larger down payment, choosing a lower-risk property type, or using an eligible program that offers LLPA waivers or credits.
How much do LLPAs cost?
LLPAs typically range from 0% up to about 3.5% of the loan amount, depending on risk factors. Most borrowers see adjustments in the 0.25% to 1.5% range.
Do LLPAs apply to refinances?
Yes. Cash-out refinances usually have the highest LLPAs. Limited cash-out refinances and rate-and-term refinances have smaller adjustments, but the exact amount depends on credit score and LTV.
What credit score gets the best LLPA?
Borrowers with scores of 780+ typically qualify for the lowest LLPAs. Adjustments increase as scores fall, especially under 700. The highest LLPAs apply below 640.
How do down payments affect LLPAs?
Larger down payments reduce LLPAs. The closer you get to 20% down, the smaller your adjustments. At 40% down (60% LTV), most credit score penalties shrink considerably.
Do condos have higher LLPAs?
Often, yes. Many condo loans carry a 0.125% to 0.75% adjustment depending on occupancy, LTV, and whether the condo is warrantable. The exact cost depends on the loan's full risk profile.
Can I pay LLPAs upfront instead of in my rate?
Yes. LLPAs can be charged as upfront points at closing or built into your interest rate. Most lenders choose to adjust your rate, but you can often request to pay them upfront to reduce your ongoing interest costs.
