How Credit Effects Interest Rates...

By now, almost everybody is aware that credit scores affect the interest rate that a borrower receives on a loan, but many don’t realize just how drastic the effects are. Below is a grid that can be found on www.myfico.com that shows the various interest rates based on different credit scores (Note: Rates are national averages and may include points).

30 year Fixed Mortgage       

1. 760-850     6.059%     $1629
2. 700-759     6.281%     $1668
3. 660-699     6.565%     $1718
4. 620-659     7.375%     $1865
5. 580-619     9.451%     $2261
6.  500-579     10.31%     $2432  

Furthermore, not only is the interest rate impacted by the lower credit scores, but the Private Mortgage Insurance premiums are also more costly for lower credit scores. A person’s credit score has a significant financial impact – not only on home loans, but car loans, credit card bills, and other financing options as well!

On the bright side: FHA loans currently do not increase the interest rate or mortgage insurance premium for low credit scores. For borrowers with lower scores, an FHA loan will most likely be the best scenario. As your 1^st Elite Home Loans loan officer, my role is to determine the best possible loan for your clients.

Looking for credit scoring tips??? I’m here to help! If you have clients that may need some information / tips on ways to improve their credit, feel free to ask. I’ll be happy to provide some information for you to share with your clients.

Don’t forget - if what you’re doing today isn’t yielding the results you want, then something has to change.