Categories
Make Money From Home

‘One actionable thing’ that can save prospective homebuyers up to $104,000 over the life of their mortgage – CNBC

As today’s prospective home buyers confront high home prices and rising interest rates, there’s one thing they can do to save money — raise their credit scores.

“This is one actionable thing buyers can do to save a little bi…….

As today’s prospective home buyers confront high home prices and rising interest rates, there’s one thing they can do to save money — raise their credit scores.

“This is one actionable thing buyers can do to save a little bit of money in this market,” said Amanda Pendleton, consumer finance expert at Zillow Home Loans.

A new analysis from Zillow finds home buyers with lower credit scores may pay $103,626 more over the life of a 30-year fixed mortgage loan than someone with an excellent score, based on the current price of a typical home, $354,165.

More from Personal Finance:
Rents are high in these five cities. Cheaper areas come with hidden costs
Where home prices are cooling fastest, sellers need to be ‘realistic’ about price
What to know about backing out of a home purchase under contract

Buyers with fair credit scores — between 620 and 639 — may be paying $288 more per month for their monthly mortgage payments compared to home buyers with excellent scores, between 760 and 850.

That difference is due to the interest rates those borrowers are charged. While a fair credit score qualifies for a 6.688% interest rate, an excellent score can command a far lower rate of 5.099%. The calculations are based on home values from the Zillow Home Value Index and interest rates from the FICO Loan Savings Calculator as of July 26.

Credit is one factor homebuyers can control

“Affordability is the biggest story of the housing market right now,” said Pendleton.

“We’ve seen home values nationwide up nearly 20% year over year,” she said. “When you combine that with these rising mortgage interest rates, the typical monthly payment on a home is 62% higher today than it was just a year ago.”

If you’re a buyer in today’s market, a lot of factors are outside your control, Pendleton said. But you can control your credit and financial history.

Your credit score measures your likelihood of paying back a loan. Mortgage lenders use those scores to determine whether to offer you a loan, and the interest rate you will pay on that debt.

Your credit score is determined by factors considered on your credit report, such as your bill-paying history, unpaid debts, the number of outstanding loans you have, how long those accounts have been open, how much available credit you are using and new credit applications you have made.

Your credit score may vary depending on the company providing it. Scores typically range from 350 to 850.

Moves with ‘the biggest impact’ on your credit score

Courtneyk | E+ | Getty Images

“It really does pay off for a buyer to …….

Source: https://www.cnbc.com/2022/08/04/lower-credit-scores-may-lead-to-104000-more-in-mortgage-costs.html

Leave a Reply

Your email address will not be published.