On a national level, a borrower an "excellent" credit score could get a mortgage with a 4.50 percent annual percentage rate, but a borrower with a "fair" credit score would wind up with a 5.10 percent rate, thus spending $700 more per year for the typical home. In pricier housing markets, the cost differences are significantly greater.
"When you buy a home, your financial history determines your financial future," said Zillow Senior Economist Aaron Terrazas. "Homebuyers with weaker credit end up paying substantially higher costs over the lifetime of a home loan. Of course, homeowners do have the option to refinance their loan if their credit improves, but as mortgage rates rise this may be a less attractive option."