Zillow: Lower Credit Scores Add Costs to Homebuying
May 15, 2018
Homebuyers carrying a lower credit score can wind up paying $21,000 more than a buyer with an excellent credit score, according to new data from Zillow.
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."
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