What A Lower Credit Scores Costs You Today


Not all mortgage interest rates are the same. The radio may blast away advertisements claiming low low low rates in the low 5.00% range, but alas how misleading these messages are. The truth of the matter is that while the 30 year mortgage rate remains at historic lows not everyone gets the same interest rate. Mortgage interest rates are determined by your credit score. The higher your score the better the rate you will receive. Consequently, if you have lower scores you will need to pay some fees to receive the same rate offered a higher credit score borrower.

During the credit boom lenders kept a pretty low barrier before slapping on additional charges for riskier borrowers. This has all changed and the thresholds are higher and there are additional layers . The table below is sample of what Fannie Mae/Freddie Mac have been charging lenders(and what lenders then pass on to you the borrower).

The example below is of the additional fees a borrower is charged in order to receive a 6.00% interest rate on a $200,000 mortgage:


In my opinion the numbers above provide ample reasons to work on improving your credit score and positioning yourself for a home purchase. To help you get started, below, I have provided additional links on credit score and credit report related posts on Arizona Mortgage Guru Blog:

Creative Commons License photo credit: My Buffo

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