Norwalk, CT (PRWEB) August 15, 2009
Pending home sales rose for the fifth straight month in June, the National Association of Realtors reported this month, a hopeful sign that the freefall in residential real estate values has started to slow down or even reverse itself.
While many homes are already priced very low, CreditFYI, an educational consumer website on consumer credit, personal finance and fraud, notes that homebuyers with low credit scores can end up spending dramatically more money than those with high credit scores -- more than $78,000 over the life of a $216,000 loan, in fact.
"The current real estate market offers unusually low prices, low mortgage interest rates and, if you happen to be a first-time homebuyer, attractive federal tax incentives," said CreditFYI spokesperson Rob Wyse. "But smart homebuyers can save even more by ensuring they qualify for the lowest interest rates available -- those that are reserved for borrowers with superior credit scores."
The higher your credit score, the lower your interest rate will typically be on a mortgage. The spread between the highest and lowest rates currently available, based on national averages for a 30-year, non-jumbo loan, is 1.59%, according to FICO, the company behind the FICO credit score.
A borrower with a credit score of 625 could pay an annual percentage rate (APR) of 6.44%. On a $216,000, 30-year loan, that amounts to a monthly mortgage payment of $1,357. A borrower with a 775 credit score may pay an APR of 4.85% on the same loan, resulting in a $1,140 monthly payment. Over 30 years, the homebuyer with the 775 credit score will pay $78,120 less than the borrower with the 625 credit score.
For prospective homebuyers with low credit scores, CreditFYI's Wyse offers a suggestion. "Get copies of your credit reports from all three reporting bureaus, plus your credit score, long before applying for a mortgage," he says. "It can take months to correct inaccurate entries and see those corrections reflected in your score."
To read the full story, and to see how credit scores affect other aspects of the home-buying process, visit http://www.creditfyi.com/Credit-Library/Articles/How-Credit-Scores-Affect-Your-Mortgage-Rate.htm
CreditFYI.com is a leading educational consumer website on consumer credit, personal finance and fraud. For more information, visit http://www.creditfyi.com.