According to HousingWire, Fannie Mae and Freddie Mac have now officially released pricing grids for mortgages using both the traditional Classic FICO score and the newer VantageScore 4.0 model. This comes as the Federal Housing Finance Agency opened up VantageScore delivery to all lenders across the country. The two government-sponsored enterprises are applying price adjustments to VantageScore that are calibrated at 20 points higher than the equivalent FICO adjustments, meaning a VantageScore of 800 and above lines up with a FICO top tier of 780 and above.
The GSEs say they expect this move to eventually increase competition between credit scoring models, which should drive down credit reporting costs and potentially help borrowers who are considered "credit invisible" by getting access to traditional lending. While scores generated by VantageScore 4.0 tend to run higher than FICO scores, which theoretically should reduce what borrowers pay, the early adoption has been limited, with VantageScore 4.0 representing only about five and a half percent of originations as of late summer.
However, independent analysis suggests borrowers may actually face higher costs under the new grid. According to Pivot Financial's examination of the pricing outcomes, while VantageScore 4.0 might save lenders money, it makes loans noticeably more expensive for borrowers in most cases over the loan's lifetime. The firm's analysis using a four hundred thousand dollar example loan found that for borrowers with credit scores between seven hundred and seven hundred nineteen, with higher loan-to-value ratios, the additional price adjustments could add over one hundred dollars monthly and more than thirty-six thousand dollars in interest over thirty years.
The impact is even more dramatic in cash-out refinance scenarios. Pivot found that borrowers refinancing with lower credit scores and higher loan-to-value ratios could face an LLPA difference that translates to over three hundred dollars more per month and nearly one hundred ten thousand dollars in additional interest across the life of the loan. The CEO of Pivot Financial explained that the GSEs are essentially applying unknown risk adjustments because VantageScore is a fundamentally different model than FICO, and the two cannot be considered equivalent even when they produce similar numerical scores.
A separate analysis by Milliman, using historical mortgage data from the past decade, looked at how often VantageScore 4.0 would produce better or worse pricing compared to Classic FICO. The firm found that roughly forty percent of the time, borrowers would have received cheaper pricing if Classic FICO had been used instead. The pricing came out identical about thirty-six percent of the time, while VantageScore 4.0 offered better terms only about twenty-five percent of the time. Milliman noted that the calibration approach may reflect uncertainty about the new model's actual risk performance, as well as the fact that lenders can choose which score to use, potentially creating incentives to pick whichever score is most favorable to them.
What I am seeing locally here in the Bay Area is that this shift adds another layer of complexity for borrowers already dealing with tight lending standards. East Bay buyers and sellers need to understand that credit score model changes like this can meaningfully affect financing costs, and that borrowers with mid-range credit profiles or those looking to do cash-out refis may face some real headwinds. It's worth having a detailed conversation with your lender now about which scoring model will be used and how it impacts your specific situation, because these pricing grids could mean the difference of thousands of dollars over the life of your loan.
