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Even A ‘Good’ Credit Score Equals $15K More In Mortgage Costs

Most home buyers know their credit score plays a role in the mortgage application process. Buyers with a 760 or higher, for example, pay around $207,000 in interest over the course of their mortgage. Those with a 719—largely still considered a “good” score by most lenders—would cost more than $222,000 in interest, a difference of $15,000. “And even the smallest variance in rate can have a huge impact on what you pay during the life of the loan.” But it’s not just interest rate that a buyer’s credit score can impact. “A credit score can impact which type of financing a loan applicant qualifies for, the initial costs, and long-term effects of rates and fees,” Lewis said. Some lenders even accept credit scores as low as 500, according to Lewis. “The greater a borrower’s need, the more important their credit score becomes,” Barenblatt said. “Borrowers who need a high loan-to-value must have better scores than those seeking less financing.” Choosing non-traditional lenders can also help, according to Barenblatt. He suggests working with independent mortgage brokers or credit unions—who can often be more hands-on in their underwriting processes—instead. For example, a late payment emanating from a dispute with a cellular phone company or a collection from a medical bill, if well explained, may be excused, and the borrower can secure as good an interest rate as someone with a perfect score.” Buyers can also work to improve their credit score if they want to save on interest or have more options when home buying.