Your Credit Score And Today's Mortgage Rate: What It Means
As of June 4, 2023 the average US mortgage interest rate on a 30-year fixed mortgage for a $250k home with a $20k down payment and a 660 to 679 credit score is an eye-popping 8.07%. The monthly payment including all applicable taxes and fees would be $2,183. It's almost hard to believe.
However, if you added an extra $5k to the down payment and had a credit score of 760 to 779, your interest rate would drop down to 7.2% and your monthly payment would decrease $239 to $1,944 per month. At the end of 30 years, that makes a difference of $86,040 which is quite a savings.
Unfortunately, the median home price in the USA as of May 11 is $436,800. This means you most likely won't be saving only $86k on the term of your mortgage loan with a better credit score, but much more. Additionally, there is a big difference in a home loan for $250k and $436k, which means that with a credit score between 660 and 679 - if you could even qualify for financing with $25k down, you'd be paying $3,850 per month at 7.7%. What happens when you raise up that credit to 760 to 779? Your interest rate drops to about 7.03% and your payment gets pegged at $3,607 per month.
For most of us, these numbers seem outrageous, mind-numbing, and even unreal. But there's nothing that can be done about it aside from providing a larger down payment to reduce your monthly payments and lower the interest rate, right? So let's try that. At the median price of $438k let's say we have $100k for a extremely healthy down payment. What happens? Your monthly payment of 3,607 only drops down to $2,852 and your interest rate actually rises very slightly to 7.08%. Either way you look at it, home prices are high and interest rates are through the roof (no pun intended).
If your credit score is around 660, there's most likely no way you'll ever qualify for a $438k mortgage with only 5 or 10 percent down payment. In fact, you might not qualify at all. This effectively forces you to either seek lower cost homes (which are extremely difficult to find), and often don't even meet your basic size requirements.
One thing that can definitely make a difference in what you'll pay each month - and may even help you qualify for a loan that you would never qualify for normally - is to become the authorized user of a high-quality tradeline (or a few of them). While this may cost you several hundred to a few thousand dollars, getting that home you need and saving tens of thousands in the long-run - if not more - could make it one of the best decisions you've ever made.
If you're serious about purchasing a home this summer, you owe it to yourself to do everything in your power to get the best rates. Visit GFSGroup.org today to view our inventory of authorized user tradelines and discover how they just might help you reach the goals you're after. Our expert tradeline specialists can explain what kind of help is available to you and guide you in the right direction to help you obtain optimal results as quick as possible. Don't wait, reach out today and see how you can make the best of an already tough situation.
Why Tradelines Work So Well For Improving Your Credit Score