Let's Talk Credit-Scores
Impact of Credit History and Credit Score Credit history and credit score impact a buyers financing options. For example, some buyers may have a short employment history. Others may have fallen behind on bills, damaging their credit and impacting their ability to save. Still others may have no credit history. This doesn’t mean buyers will never qualify for a loan, but it will effect what loan you get. The higher the credit score, the better! How credit Scores Can Cost Buyers- Literally! Example: Let’s imagine we have two buyers, Ted & Maureen, who use the same lender. Ted’s credit score is 620, and is offered a 5.08% interest rate. Maureen s credit score is 760, and she is offered a 3.49% interest rate. Each buyer takes a 30 year fixed rate mortgage on a $280,000 home. Over the life of the loan, Ted pays: $1,517 Monthly payment $266,055 Total interest paid
Maureen pays: $1,256 monthly payment $172,131 Total interest paid
Maureen pays $261 per month less than Ted, and saves $93,960 in interest paid out over her loan term.
Impact of Interest Rates on Homeownership Market fluctuations have given us mortgage interest rates as low as 3% in recent years, but interest rates at 5% and 6% (or even higher) shouldn’t stop anyone from buying. Interest rates do impact affordability. Here's what happens to borrowing power with just a 1% interest rate increase: 4.35%: $205,959 5.35%: $183,608 From a buyers standpoint, the silver lining to rising interest rates is that they tend to have a downward pricing pressure. Even when interest rates are on the rise, buyers should understand that they’re likely paying less for a home then they would be if interest rates were lower.
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