What FHA charges you for a low credit score
Nothing.
The mortgage insurance premium is set by base loan amount, loan-to-value and term. Credit score is not in the table.1 A borrower at 548 and a borrower at 780 pay the same 0.55 percent a year and the same 1.75 percent upfront. There is no FHA surcharge for a damaged file, because HUD already charges every borrower for the insurance that covers exactly that risk.
Nor is there an agency adjustment underneath it. The conventional world has one and publishes it: Fannie Mae's loan-level price adjustment matrix, keyed to credit score and loan-to-value, which on a purchase at the lowest score band reaches as high as 2.75 percent of the loan amount.2 That grid says in its own terms that FHA, VA, Rural Development and HUD Section 184 mortgages are excluded from it.2
So where does the higher rate come from?
Two places, and they are not the same kind of thing.
The wholesale lender. Every investor prices its own FHA paper, and every FHA rate sheet carries adjustments for score, loan-to-value, loan amount and property type. They steepen below 620 and steepen again below 580. That is real, it is risk being priced, and no broker can argue it away. It is also why two lenders quote the same borrower differently on the same morning — and why a shop with one lender behind it has exactly one answer for you.
Whoever writes the loan. Their compensation. That figure is not on anybody's rate sheet, it is not set by HUD, and it has nothing to do with your credit score. It is a decision, made about you, usually without being mentioned. How it gets built into a rate is its own page.
Sometimes that is true. The trouble is that it is a claim about two numbers added together, and you were shown one total.
It is also said more often to people with low scores than to anyone else, and not by coincidence: somebody who has already been turned down twice is far likelier to accept it. Being short of options is not a pricing input. It just makes you easier to quote.
The two questions that pull them apart
- “What is the adjustment on your rate sheet for my score and my loan-to-value?” That is the market's half, and it is a number the person quoting you is looking at while you ask.
- “What are you making on this loan — and is it the same as you would make on a 720-score file?” That is their half.
Ask both of any lender, including us. Then get it on a Loan Estimate rather than a worksheet, because the Loan Estimate is the document those numbers have to survive.
The market prices risk and we cannot change that. What we charge for our own work is ours to decide, and it does not move with your credit score. The margin on a 550 file is the margin on a 750 file.
Bad things happen to good people — an illness, a divorce, a business that did not make it, two years nobody plans for. A credit score is a record of a hard stretch. It is not a measure of the person who went through it, and it is not an invitation to charge more because somebody has fewer places left to go.
We are not here to make money out of the worst year of your life. We are here to help you get to a better one — and if we do this properly, the next time you refinance you will not be on this page.
How to hold us to it
Do not take the paragraph above on faith. Take our Loan Estimate to two other lenders and compare it line by line — and if one of them genuinely beats us on the total cost of rate, lender fees and mortgage insurance combined, we will pay you $1,000 for showing us.
That offer is not priced differently for a 550. It is the same offer, which is rather the point.
Sources
These references support the factual explanations above. Where this page states a preference rather than a fact, it says so — those are our editorial judgement, not a claim that any one channel always costs less.
Next
What a 500–579 score costsIt changes the down payment and it shortens the list of lenders. It does not end the conversation.The two ways to pay a brokerLender-paid or borrower-paid — where each appears, and which can cost less.Priced against your actual file
FHA limits are set county by county, and what the mortgage insurance costs depends on where your loan-to-value lands. Send us the basics and we’ll price it properly — no credit pull, and it commits you to nothing.