VantageScore 4.0 and Conventional Refinances: The One Question to Ask
Harley bought a home a few years ago and is now ready to refinance a conventional loan. Harley is a fictional example, but the situation comes up often. Harley assumes the credit score model that was used on the first loan will be the one pulled again. That assumption is worth checking before anyone touches Harley's credit.
The rule in plain terms
VantageScore 4.0 is now allowed on conventional loans sold to Fannie Mae and Freddie Mac. Many people hear that and think it only matters for home purchases. It does not. It applies to rate-term refinances and cash-out refinances as well. Because Harley's loan is conventional, it is in play.
Why the model matters
Credit scoring models are not identical. They treat some credit details differently, so the same person can see a different score depending on which model is used. That does not mean one model is always higher or lower. It means the number on the page depends on the model behind it.
Lenders also choose which model they use. Not every lender has switched, and some may still lean on what they have always used. So Harley's starting point can depend on who Harley calls. That is a surprise for most people, and it is a good reason to ask early.
What this does not cover
This is a conventional loan conversation. FHA, VA and USDA loans follow their own rules, so do not assume this applies to them. If a past client is in one of those programs, the best path may look different, and that is a separate conversation.
The one thing Harley can do today
Harley can ask the lender a single question: which credit score model will you pull for my conventional refinance? It is a fair question, it takes ten seconds, and it sets expectations before any credit is checked. If the answer is unclear, that is useful information too.
The same question works for any past client. If you are a real estate agent or referral partner, your past clients may come to you first when they start thinking about a refinance. You do not have to explain scoring models. You can simply pass along that question.
How I approach it
Before credit is pulled on a conventional refinance, I want to know which model is in play and what it means for the file. I also want to confirm the loan is actually conventional, since the program determines which rules apply. My job is to find the path that fits the borrower, not to push a one-size-fits-all answer.
A note for agents and referral partners
Here in Charleston, past clients who bought a few years ago may start asking about a refinance. When they do, a little knowledge helps you stay a trusted resource. Here is the short version you can share:
- VantageScore 4.0 is allowed on conventional loans sold to Fannie Mae and Freddie Mac.
- That includes rate-term and cash-out refinances.
- Lenders choose which model they use, so it varies.
- Ask: which credit score model will you pull for my conventional refinance?
- FHA, VA and USDA follow their own rules.
Next step
If you have a past client or buyer thinking about a conventional refinance, send them my way. I am Jason Sharon with Home Loans Inc, and I will walk them through which model applies and what it means for their next step. Call 843-LOW-RATE or visit homeloansinc.com.
Home Loans Inc - Jason Sharon, Mortgage Broker. Company NMLS #1728740, Jason Sharon NMLS #1281448. Equal Housing Opportunity.
