How Much Does Credit Score Affect Mortgage Rates?

Most homebuyers need a mortgage to purchase their dream properties. However, since this is a loan repayable over up to 30 years, lenders often screen potential borrowers thoroughly to determine if they are a good fit for a loan. One of the main criteria they look at includes the individual’s creditworthiness, i.e., their credit score.

How much does credit score affect mortgage rates? Altitude Home Loans, the leading mortgage lenders in Tucson, AZ, looks at the details in this post.

The Different Classes of Credit Scores

When you apply for a mortgage, the lenders will pull a single consolidated report on your credit history from the three major credit bureaus. The report will feature a score that can tell the lender whether you’re a risky borrower or not in one glance. The various classes of credit scores are as follows:

• 800 to 850 – Excellent
• 740 to 799 – Very Good
• 670 to 739 – Good
• 580 to 669 – Fair
• 300 to 579 – Poor

Looking at the above numbers, you can say that the right credit score for mortgage applications starts at >700.

How Does Credit Score Influence Mortgage Rates?

How much does credit score affect mortgage rates? Significantly. Lenders look at the score to determine if you can meet up with your mortgage payments. Even more importantly, they use the score to determine the loan terms and the interest rate band to place you in to adequately offset the risk of the loan.

Therefore, people with excellent credit scores tend to get the lowest interest rates. People with fair or poor rates may not get their applications approved. Where it’s approved, the interest rates will be significantly higher than the average.

The importance of credit score on your mortgage application cannot be overemphasized. A difference of 1.9% between the interest rates for two borrowers in the “Excellent” and “Good” score categories could mean a difference of up to $78,000 in total payments over 30 years.

Curious about what your interest rate numbers might be without making an application? You can search “mortgage rate calculator credit score” to find online calculators that will provide you with an estimate.

Other Mortgage Rate Factors

While it’s hard to ignore the credit and mortgage correlation, it’s important to note that the credit score is not the only factor that affects your mortgage rates. Other factors lenders consider include the following:

• Loan type (adjustable vs. fixed rate) and term
• The downpayment amount
• The location of the property
• Your debt-to-income ratio
• The lender’s unique policies

Therefore, the debate on home loan interest and credit scores will always be nuanced.

Looking for a Mortgage in Tucson, Arizona? Contact Altitude Home Loans

How much does credit score affect mortgage rates? It’s a question with a clear answer. However, the credit score impact on mortgage rates is not set in stone.

Our loan officers take a holistic look at applications before offering highly competitive rates. We can also discuss other loan options, such as guarantor loans.

Contact us at 520-500-1010 to schedule a consultation.