What Mortgage Rate Can I Get With My Credit Score?

General

A
reader
recently
asked,
“What
mortgage
rate
can
I
get
with
my
credit
score?”
So
I
figured
I’d
try
to
clear
up
a
somewhat
complex
question.

With
mortgage
rates
no
longer
at
all-time
lows
(sigh),
borrowers
looking
to

refinance
a
mortgage
or
purchase
a
home
are
facing
an
uphill
battle.

Today,
it’s
much
more
common
for
your
rate
to
start
with
a
6
or
7
as
opposed
to
a
2
or
3.
While
these
higher
rates
aren’t
bad
historically,
the
velocity
of
change
over
the
past
few
years
has
been
dramatic.

This
contrasts
those

1980s
mortgage
rates,
which
were
already
high
before
simply
moving
even
higher.

But
no
matter
where
mortgage
rates
are,
your
credit
score
will
play
a
huge
role
in
determining
whether
you
get
a
good,
average,
or
not-so-good
rate.

What
you
see
advertised
isn’t
always
what
you
get,
and
could
in
fact
be
a
lot
higher
if
you’ve
got
marginal
credit
scores.

Conversely,
you
might
be
able
to
score
a
below-market
rate
if
you’ve
got
an
excellent
FICO
score.

Let’s
explore
why
that
is
so
you
can
set
the
right
expectations
and
avoid
any
unpleasant
surprises
when
you
finally
speak
to
a
lender.

Mortgage
Rates
Are
Based
on
Your
Credit
Score

The
illustration
above
should
give
you
an
idea
of
the
importance
of
credit
scores
When
it
comes
to
mortgages
even
a
small
difference
in
rate
can
equate
to
thousands
of
dollars
Someone
could
have
a
rate
0.75%
higher
(or
more)
based
on
credit
score
alone
So
be
sure
all
3
of
your
credit
scores
are
as
high
as
possible
before
you
apply!

The
graphic
above
was
based
on
real
advertised
rates
from
Zillow’s
marketplace
for
a
$400,000
loan
amount
at
80%
loan-to-value
(LTV)
for
a
30-year
fixed
on
an
owner-occupied,
single-family
residence.

While
interest
rates
are
quite
a
bit
higher
today,
the
same
sliding
scale
rule
applies.

Those
with

higher
credit
scores
will
get
the
lowest
mortgage
rates
available,
while
those
with
lower
credit
scores
will
have
to
settle
for
higher
rates.

Notice
that
the
interest
rate
is
a
full
0.75%
higher
for
a
borrower
with
a
620
FICO
score
versus
a
borrower
with
a
740+
FICO
score.
That
can
equate
to
a
lot
of
money
over
time.
And
mortgages
can
last
a
long
time,
sometimes
30
years!

One
thing
that
determines
what
mortgage
rate
you’ll
ultimately
receive
is
credit
scoring,
though
it’s
just
one
of
many
factors,
known
as

mortgage
pricing
adjustments,
used
to
determine
the
price
of
your
loan.

Along
with
credit
scoring
is

documentation
type,
property
type,
occupancy
type,
loan
amount,

loan-to-value,
and
several
others.

Each
pricing
adjustment
is
essentially
applied
based
on
risk.
So
a
borrower
with
a
high-risk
loan
must
pay
a
higher
mortgage
rate
than
a
borrower
who
presents
low
risk
to
the
lender.

This
is
how

risk-based
pricing
works.

Borrowers
with
Lower
Credit
Scores
Present
More
Risk
to
the
Lender
(And
Must
Pay
More!)

Simply
put,
the
less
risk
you
present
to
your
mortgage
lender,
the
lower
your
mortgage
rate
will
be.
And
vice
versa.

That’s
because
they
can
fetch
a
higher
price
for
your
lower-risk
home
loan
when
they
sell
it
on
the
secondary
market.

Lenders
consider
a
number
of
things
to
measure
risk,
as
mentioned
above.

Using
credit
score
alone,
it’s
impossible
to
tell
a
prospective
borrower
what
they
may
qualify
for
without
knowing
all
the
other
important
pieces
of
the
puzzle.

But
I
will
say
that
your
credit
score
is
definitely
one
of
the
most
important
(if
not
the
most
important)
factor
that
goes
into
determining
your
mortgage
interest
rate.

And
as
I
always
say,
it’s
one
of
the
few
things
you
can
mostly
control.
Pay
your
bills
on
time,
keep
your
outstanding
balances
low,
and
apply
for
new
credit
sparingly.

If
you
follow
those
simple
tips,
your
credit
scores
should
solid.
It’s
not
rocket
science.

How
Much
Does
Credit
Score
Affect
the
Mortgage
Interest
Rate?

There
are
pricing
adjustments
specifically
for
credit
scores
They
can
raise
your
mortgage
rate
significantly
if
you
have
poor
credit
The
adjustments
grow
larger
as
credit
scores
move
lower
And
are
especially
impactful
if
you
also
come
in
with
a
small
down
payment

Generally
speaking,
a
credit
score
of
780
or
above
should
land
you
in
the
lowest-risk
bracket
(it
used
to
be
740
and
before
that
720).
So
it
has
gotten
harder.

If
all
other
areas
of
your

unique
borrowing
profile
are
also
in
good
standing,
you
will

qualify
for
a
mortgage
at
the
lowest
possible
interest
rate.

Of
course,
you’ll
need
to
comparison
shop
to
find
that
low
rate
too.
It
won’t
necessarily
come
looking
for
you.
But
you
should
at
least
be
eligible
for
the
best
a
bank
or
lender
has
to
offer.

This
lower
monthly

mortgage
payment
will
allow
you
to
save
on
interest
over
the
entire

mortgage
term.

As
mentioned,
credit
score
can
be
hugely
important
in
determining
pricing
because
lenders
charge
massive
adjustments
if
your
score
is
low.

Just
take
a
look
at
the
chart
above
from
Fannie
Mae.
If
your
credit
score
is
780
or
higher,
you’ll
only
be
charged
0.375%
(this
isn’t
a
rate
adjustment
but
rather
a
pricing
hit)
at
80%
LTV
(20%
down
payment).

Conversely,
if
your
credit
score
is
between
640
and
659,
you’ll
be
charged
2.25%
in
pricing
adjustments.

For
the
borrower
with
a
650
credit
score,
this
might
equate
to
an
interest
rate
that
is
0.75%
higher
on
a
30-year
fixed
mortgage
versus
the
780-score
borrower.

That
difference
in
rate
could
stick
with
you
for
years
if
you
hold
onto
your
mortgage.

This
means
higher
payments
month
after
month
for
decades,
all
because
you
didn’t
practice
good
credit
scoring
habits.

Not
only
can
a
good
credit
score
save
you
money
monthly
and
over
time,
it
will
also
make
qualifying
for
a
mortgage
a
lot
easier.

For
these
reasons,
your
credit
score
should
be
your
top
concern
when
applying
for
a
mortgage!

What
Credit
Score
Do
You
Need
for
Best
Mortgage
Rate?

Most
mortgage
rate
ads
you’ll
come
across
make
lots
of
assumptions
(if
you
read
the
fine
print)
You’re
often
required
to
have
a
credit
score
of
740
or
higher
for
the
best
rate
If
your
credit
scores
aren’t
that
good,
expect
a
higher
rate
when
obtaining
a
quote
Fannie
Mae
and
Freddie
Mac
now
require
a
780
FICO
score
for
the
lowest
mortgage
rates

If
you’ve
ever
seen
a
mortgage
advertisement
on
TV
or
the
Internet,
the
lender
assumes
you’ve
got
an
excellent
credit
score.

This
could
mean
a
credit
score
of
720,
740,
or
possibly
even
higher.
And
they
use
that

assumption
to
produce
a
favorable
mortgage
rate
in
their
ad.

For
example,
Wells
Fargo’s
mortgage
rate
page
has
a
disclaimer
that
reads,
“This
rate
assumes
a
credit
score
of
740.”

But
without
that
great
credit
score,
your
mortgage
rate
could
be
significantly
higher
when
all
is
said
and
done.

And
now
that

Fannie
Mae
and
Freddie
Mac
have
added
new
credit
scoring
tiers,
these
credit
score
assumptions
may
rise
to
780
for
the
lowest
advertised
rates.

Long
story
short,
aim
for
780+
credit
scores
from
now
on
if
you
want
to
qualify
for
the
best
rates.

Borrowers
With
Low
Credit
Scores
May
Have
Trouble
Getting
Approved

At
the
other
end
of
the
spectrum,
borrowers
with
credit
scores
of
say
660,
640,
and
620
will
have
greater
difficultly
securing
a
mortgage.

Assuming
they
are
able
to
get
approved
for
a
home
loan,
they
will
receive
higher

mortgage
rates.

Unfortunately,
I
can’t
say
you’ll
get
X
or
Y
mortgage
rate
if
you
have
Z
credit
score,
there
are
just
too
many
factors
in
play
all
at
once.
And
credit
score
is
just
one
of
them,
albeit
a
very
important
one.

But
I
can
say
that
your
credit
score
is
hugely
influential
in
determining
both
the
mortgage
rate
you’ll
receive
and
whether
you’ll
successfully
obtain
home
loan
financing
to
begin
with.

So
it’s
recommended
that
you
check
your
credit
score(s)
3+
months
before
applying
for
a
mortgage
to
see
where
you
stand.
And
continue
to
monitor
them
up
until
you
apply.

This
shouldn’t
be
much
of
a
chore
or
even
an
expense
now
that
so
many
companies
provide
free
credit
scores,
including
major
banks
and
credit
card
issuers.

For
example,
the
many
banks
and
credit
card
companies
I
do
business
with
offer
free
scores.
And
it’s
actually
interesting
to
see
the
divergence
in
scores
across
different
companies.

[How
to
get
a
mortgage
with
a
low
credit
score.]

Check
Your
Credit
90+
Days
Before
Shopping
for
a
Mortgage!

Don’t
chance
it
–
check
your
credit
scores
3+
months
in
advance
This
allows
you
to
see
where
you
stand
credit-wise
and
gives
you
time
to
fix
things
It
may
take
months
to
turn
things
around
if
you
need
to
improve
your
scores
Things
like
disputes
may
take
90
days
or
longer
to
complete
and
reflect
in
your
scores
Aim
for
a
780
FICO
score
to
qualify
for
the
best
mortgage
rates

If
you
don’t
know
your
credit
scores
several
months
in
advance
of
applying
for
a
mortgage,
you
may
not
have
adequate
time
to
make
any
necessary
changes.

Trust
me,
surprises
come
up
all
the
time
when
it
comes
to
credit.

An
erroneous
(or
forgotten)
late
payment
could
deflate
your
credit
scores
substantially,
even
if
it’s
reporting
in
error.

And
that
lower
score
could
increase
your
mortgage
rate
a
percentage
point
or
more.
Yes,
credit
scores
can
make
that
much
impact!

Disputing
errors
and/or
addressing
other
credit
missteps
can
take
many
months
to
complete,
so
don’t
hesitate
to
check
your
credit
if
you
think
you’ll
be
applying
for
a
mortgage
at
any
point
in
the
near
future.

It’s
good
to
know
where
you
stand
at
all
times,
but
especially
before
applying
for
a
home
loan.
Don’t
just
assume
you’ve
got
excellent
credit.
Verify
it!

And
while
you’re
at,

don’t
make
a
lot
of
purchases
before
applying
for
a
mortgage.
That
too
can
sink
your
scores.

The
good
news
is
poor
credit
scores
can
be
improved.
You’re
aren’t
stuck
with
them.
If
your
credit
scores
need
some
TLC,
take
the
time
to
improve
them
instead
of
settling
for
a
higher
rate
today.

If
your
scores
are
already
excellent,
don’t
forget
to
shop
around!
Simply
comparing
a
few
different
lenders
can
be
just
as
important
as
maintaining
good
credit.

What Mortgage Rate Can I Get With My Credit Score?

Mortgage Rates Are Based on Your Credit Score

Borrowers with Lower Credit Scores Present More Risk to the Lender (And Must Pay More!)

How Much Does Credit Score Affect the Mortgage Interest Rate?

What Credit Score Do You Need for Best Mortgage Rate?

Borrowers With Low Credit Scores May Have Trouble Getting Approved

Check Your Credit 90+ Days Before Shopping for a Mortgage!