Your Credit Score Affects Your Mortgage Rate
Your credit score holds major influence in your interest rate. The better your score is, the better your interest rate will be. It also goes without saying that a high credit score can give you better chances of getting a home loan. Buyers with a FICO score of 620 and below, can still get a mortgage, but will be in for a rough ride.
Based on myFICO, a borrower with a FICO score between 680 and 699 trying to borrow $200,000 in South Carolina would have qualified for a 4.569 percent rate on a 30-year fixed mortgage, resulting in a $1,022 monthly payment. In comparison, a borrower with a FICO score between 620 and 639 would have qualified for a 5.759 percent rate, resulting in a $1,168 monthly payment. That’s $52,813 difference on interest payment.
|Credit Score||APR||Monthly Payment||Total Interest Paid|
Source: MyFico.com Loan Savings Calculator; rates based on South Carolina averages, assumes $200,000 loan principal, 30-year fixed-rate mortgage.
While a not so good credit score can impact the interest rate you’ll pay on your mortgage, it doesn’t have to be a roadblock to reach your goal of buying a home. You can still get a mortgage. You’ll just have to put in more effort to improve your score or put down more money.
If you do not have the minimum credit score to buy a home and you need to buy a home in the near future, you can improve your credit score in 6-12 months by following these tips. Work on improving your credit score as soon as you can since it can take a few months to see improvement in your score. Make sure you stay current on your payments, pay off your debts, check your credit report for errors and dispute them if you found inaccuracies.
Need Help with Financing?
Free Mortgage Guide
If you are buying a home or anyone you know who is thinking of buying a home, use this Home Loan Toolkit to help you understand and help you get the best mortgage specific for your situation. This guide will also help you understand the mortgage process and overview of the total costs of homeownership.