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How Does a Low Credit Score Affect My Interest Rates?

By
Real Estate Agent with CENTURY 21 WESTERN REALTY

You May Never Own A Home FOR YEARS
Whether or not you've always had poor credit, or have just suffered from the recent mortgage crisis, this is a very real possibility for individuals. If you have low scores or problematic reports, lenders will either deny you flat out or penalize you with such exorbitant rates that the outcome ranges from completely undesirable to impossible.

You Will Pay Higher Interest Rates
It just makes sense that if you have higher credit scores, you will pay a lower interest rate on your mortgage loan and will have to put less down. Below 620 3.000%: 620-639 2.750%: 640-659 2.250%: 660-679 1.750%: 680-699 0.750%: 700-719 0.500%

 Pay More For Private Mortgage Insurance (PMI)
PMI is insurance that mortgage lenders require from most homebuyers who have less than a 20% down payment on their property. If your credit scores are marginal, your private mortgage insurance rate might be hundreds of dollars higher per month than you expect, and you usually don't find this out until closing.

 Ability To Refinance For Cash Out.
As you build equity in the ownership of your home, you may decide to borrow against that equity for the purpose of home improvement, debt consolidation, or even to pay college tuition for your children. Lower credit scores will not only affect your ability to take out a home equity line of credit (HELOC), but you will also have to pay higher interest rates and other upfront costs if you are approved.