Does credit score affect mortgage rates? There's no question it does. This three-digit score has a profound impact on whether you'll be approved for a loan from the best mortgage lenders as well as the interest rate you'll pay for a home loan.
So how exactly does credit score affect mortgage rates? Here's what you need to know.
The table below tells you the answer to the question "does credit score affect mortgage rates." It shows what you'd pay per $100,000 in mortgage debt with various credit scores if you took out a 30-year fixed-rate mortgage.
|FICO® Score range||Mortgage APR||Monthly payment||Total interest||Extra interest compared with excellent credit|
You could pay more than $31,000 in extra interest per $100,000 borrowed if your score is very low compared to very high. Even dropping down just one score range could cost more than $4,000 in extra interest for each $100,000 borrowed over the life of your loan.
The answer to the question "does credit score affect mortgage rates" is a resounding yes. So it's imperative you do everything possible to improve your credit before applying for a mortgage. Some steps to take include:
It can pay to take a few extra months to try to boost your credit score before applying for a mortgage loan. Answering the question "does credit score affect mortgage rates" shows why this can make sense. Raising your credit score could save you thousands of dollars in interest over the life of the loan.
You can also consider shopping with the best mortgage lenders for first-time home buyers if your credit is imperfect. They may be more forgiving of a lower credit score.
Clearly, based on the answer to the question "does credit score affect mortgage rates," it's important to have good credit when you apply for a mortgage.
By working to get a good credit score, you can secure the most favorable terms possible for your mortgage -- and your loan should be more affordable to pay back due to your efforts.
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