How Your Credit Score Affects Buying A Home
If you are thinking about purchasing a home it’s important to know your credit score. Lenders examine your credit history when determining whether you qualify for a home loan. Your credit history and credit score play a major role getting approved and in the interest rate your lender will offer you. The higher your credit score is the better interest rate you will get.
Once you begin making mortgage payments, your lender will report the new loan to the credit bureaus and it will appear on your credit report. If you make regular payments and make them on time this has a favorable impact on your overall credit score.
So what about if you don’t have a good credit score? Well depending on the lender your credit score must be at least 660 (this is considered mid range) to get a mortgage loan. Having a lower credit score will still get you a loan but it affects your interest rate, buying power, down payment and mortgage insurance.
A higher interest rate changes everything when buying a home. Here is an example of the National Mortgage Interest Rate for 2015 when purchasing a $150,000 home with a 30 year fixed loan:
| Credit Score | Interest Rate | Monthly Payment | Total Interest Paid |
|---|---|---|---|
| 760 to 850 | 3.47% | $671 | $91,490 |
| 700 to 759 | 3.69% | $689 | $98,217 |
| 680 to 699 | 3.87% | $705 | $103,650 |
| 660 to 679 | 4.08% | $723 | $110,301 |
| 640 to 639 | 4.51% | $761 | $123.931 |