Portsmouth home buying 101, how does your FICO score affect your house payment?

Portsmouth area (and all others) should know their FICO score before trying to buy a home. Most lenders quote their mortgage rates based on your FICO score. If you have lower than an ‘A’ score, your interest rate will be higher which will also make your monthly payment higher.

There is an inverse relationship between the credit score and the interest rate charged.  The higher the score, the lower the rate will be.  You can see from the chart, this lender quoted their best rate for a buyer with a credit score of 760-850.  However, a buyer with the minimum acceptable score of 620-639 would have to pay 1.6% higher interest.  In the example below, it makes almost $250 a month difference.

If you multiply that $250 times the 360 payments you’ll be paying with a 30 year mortgage you’ll see that could cost you tens of thousands of dollars.

The figures below are based on a $250,000 loan amount and a 30 year fixed rate mortgage

Your FICO Score APR Monthly Payment
760-850 3.946% $1,186
700-759 4.175% $1,219
680-699 4.359% $1,246
660-679 4.580% $1,279
640-659 5.025% $1,346
620-639 5.590% $1,434

So your logical first step is to get pre-qualified or pre-approved with a mortgage lender prior to looking at homes.  This gives the buyer the confidence of knowing how much mortgage is available and if they can expect the best interest rate which will lower their payment.  Other benefits include bargaining power, quicker closing and the chance to discover any issues on their credit report that need to be corrected before making an offer on your future home.

We have a great new listing coming up later this week in Seabrook, mid-low $200s and move in ready. Give us a call to be the first to see it before anyone else.

Visit us online at PortsmouthNewHampshireHomes.com to view all Portsmouth and southern Maine Realtor listings, find local information, and get valuable buying and selling information.

Please give us a call or mail with any Portsmouth, NH area real estate questions. Our weekly market report should be out tomorrow and we can see how many homes sold this past week in the Portsmouth market.

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