It’s common knowledge that borrowers must have an average or above-average credit score to purchase a home. However, credit scores are far more important when purchasing a home than you might think, as only buyers with the highest scores are eligible for the lowest interest rates.
While borrowers with credit scores above 760 are most likely to receive the lowest advertised interest rates, folks with lower credit score will end up paying significantly more over the life of the loan.
For a $225,000 home loan, for example, borrowers with credit scores between 700-759 will end up paying $10,000 more than their higher credit score counterparts during the 30-year loan term. If your score is significantly less, between 620-639, you’ll end up pay a staggering $74,000 more over the life of the loan.
The majority of loan programs require a borrower to have a score above 620, although some government-backed mortgage giants allow scores as low as 580.
Curious about learning how your credit score might affect your interest rate? Be sure to check out myFICO’s home loan calculator.