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Mortgage rates by credit score
The Rate You Can Expect on a Mortgage by Your Credit Score
When making a large-scale purchase, such as your home, you want to find the absolute best interest rate. This is especially important considering that most home loans come with a term of 20 to 30 years. A good credit score for a mortgage is one that will allow you to qualify for an advantageous and affordable interest rate.
Unlike some other forms of loans, many lenders will not provide a mortgage to a potential homebuyer who has a score below 620 simply because of the size and risk involved with granting a home loan. Those who have lower scores will usually be required to put down at least 10%, if not more, to satisfy the lender.
Credit Scores and Your Mortgage Rate
Mortgage companies use many different credit score models to determine the rate they are going to use for your loan. These models are typically influenced by the length of your credit history, your payment history, and your current debt-to-income ratio. Those with good credit scores can qualify for more desirable loan types. Here is a quick look at how your credit score can affect the interest paid on your mortgage.
| FICO Score | Mortgage APR | Monthly Payment |
|---|---|---|
|
760 – 850 |
3.285% |
$1,311 |
|
700-759 |
3.507% |
$1,348 |
|
680-699 |
3.684% |
$1,378 |
|
660-679 |
3.9% |
$1,415 |
|
640-659
|
4.33% |
$1,490 |
|
620-639 |
4.874% |
$1,587 |
- Rates are based on a $300,000 / 30-year mortgage Source: myFICO (data as of February 4, 2022)
Qualifying for a Lower Rate
As you can see from the table above, your credit score can affect the amount you pay for your home by tens of thousands of dollars. For those looking to obtain the very best rate for their mortgage, it can be incredibly beneficial to increase your credit score before applying to mortgages. This will ensure that you receive a more competitive rate and will save you a significant amount of money in the long run. The money that you can potentially save on your mortgage is well worth the time and hard work that you dedicate to lowering your score.
Managing Your Credit Score
Before beginning the mortgage process, you should check your credit score so that you know where you stand and what rate you can qualify for. You can check your score through many free, online services, your bank, credit union, and your credit card providers.
Researching and managing your credit score is one of the most effective ways of ensuring a better rate on your mortgage. Your credit score will likely impact any significant purchase that you make throughout your life, so it is always a best practice to stay on top of it regularly.