How your credit score affects your buying power when looking at homes
When I'm working with a buyer, I always emphasize the importance of Good Credit.
Having a good credit score or working with someone to help boost your score before you buy a home will determine a lot of things when making that move so make sure you have all your ducks in a row before you start. Speaking with a Banker and a Real Estate Professional in advance will help you determine the steps you need to take to live in the home and in the city you want.
Here are a couple of financing scenarios showing the difference in mortgage payments at different interest rates and how credit scores can affect a borrower's payments.
Sally has a 740 plus credit score and is considered to have excellent credit. The banks don't have any adjustments to the interest rates with these scores, and Sally can borrow without any problems or increases in her payment
Using the same scenario let's say Sally has a 700 credit score. The interest rate increases by .125%.That is a difference of $23.15 a month, which is $277.80 a year, $8,334 over the life of a thirty-year loan.
Comparing the 740 score to a 660 credit score the difference is an interest rate increase of .375% that is $69.98 a month, $839.76 a year and $25,192.80 over the life of the loan.
Here's an example
Another point to look at is if a borrower places less than 20% down and they have PMI "Private Mortgage Insurance" In this situation the borrowers PMI is based on their loan amount and credit score so the lower the credit score, the higher the monthly PMI payment.