Why is 740 FICO an LLPA breakpoint?

Fannie Mae and Freddie Mac group loan-level price adjustments in FICO bands. The Fannie Mae LLPA matrix uses 740 to 759 as a discrete band that prices materially better than 720 to 739. Hitting 740 typically lowers the rate or points by 0.25 to 0.50 percent for a 95 percent LTV conventional loan.

What conventional PMI rate at 740 FICO?

Major mortgage insurers typically price 740 to 759 FICO at 0.30 to 0.40 percent annual for 95 percent LTV in mid-2026. At 96.5 percent LTV the rate may rise to 0.35 to 0.45 percent.

Is there any reason to take FHA at 740 FICO?

Rarely. The main scenarios are: extremely short planned hold (under 2 years), property condition requires FHA 203k renovation financing not available on conventional, or seller has a pre-assigned FHA case number with a recent appraisal you can adopt. Otherwise conventional saves $30,000 or more across a typical hold.

FHA vs Conventional with a 740 Credit Score

740 FICO crosses into the second-best Fannie Mae LLPA band (740 to 759). Conventional PMI is roughly 0.30 to 0.40 percent and cancels in year 8. FHA at this credit profile is the structurally wrong choice for almost every buyer.

Verdict

Conventional, in nearly every scenario. Total savings over a 10-year hold typically exceed $30,000 on a $300k loan once PMI cancellation, the avoided UFMIP, and the LLPA tier advantage are stacked.

Why 740 is the breakpoint

The Fannie Mae LLPA matrix (and the parallel Freddie Mac risk-based pricing grid) defines FICO bands at 760+, 740 to 759, 720 to 739, 700 to 719, 680 to 699, 660 to 679, 640 to 659, and under 640. The price-step from 720-739 to 740-759 is typically 0.25 LLPA points at 95 percent LTV. At 760+ another step lifts the price advantage further. Hitting 740 unlocks the second tier and removes most of the risk premium that makes FHA competitive at lower scores.

$300k home at 740 FICO, 10% down

Cost line	FHA	Conventional
Down payment	3.5% ($10,500)	10% ($30,000)
Base loan amount	$289,500	$270,000
UFMIP	$5,066 rolled in	None
Annual MI	0.55%	0.30 to 0.40%
MI duration	Life of loan (under 10% down)	Cancels at 78% LTV (~year 6 at 10% down)
30-year MI total	~$47,520 + UFMIP	~$6,500

The narrow FHA cases at 740 FICO

FHA 203(k) renovation. If the property needs $25k+ in immediate repairs, FHA 203(k) Standard or Limited may finance them. Conventional HomeStyle is the comparable product; eligibility and rate may favour either depending on borrower and lender. See FHA 203(k).
Hold under 2 years. Even at 740 FICO, the absolute monthly cost difference is small enough that a buyer planning a job-relocation sale within 2 years may indifferent between the two.
Manual underwrite for unique income. A 740 FICO buyer with brand-new self-employment or commission income may still hit conventional automated underwriting refusal, and FHA manual underwrite with compensating factors can clear.

Rate disclaimer

Numbers reflect Fannie Mae LLPA Matrix February 2026 and typical PMI provider rate cards. Rates change frequently; consult a licensed loan officer.

Sources

Fannie Mae LLPA Matrix: LLPA matrix
HUD ML 2024-04: HUD ML 2024-04
HPA 12 USC 4902: 12 USC 4902

Related: 700 FICO | 780+ FICO | PMI by FICO