Mortgage Rates - What Credit Score Do You Need To Get Below 6%?

The credit score is the primary factor that determines your interest payments on mortgage loans. Your credit history, i.e. your previous loan repayment history, total outstanding debt as well as types of credit availed previously. The better your credit score, the lower your mortgage rate will be. 

What is the Optimal Credit Score Required? 

Credit scores generally range between 300-850. Typically, a credit score of more than 800 is considered excellent, meaning you can avail mortgage loans at a lower rate than most. Scores ranging between 740 and 799 are considered second-tier and are considered “Very Good”. However, any score below 579 is considered “poor,” and the borrowers are labeled subprime. 

How Much Can You Save With a Better Credit Score? 

As mortgage loans are generally long-term credits, with an average repayment tenure of 15 years to 30 years, even a slightly lower interest rate translates to thousands in savings. 

For instance, you can get a 30-year fixed mortgage loan at a 4.835% interest rate ( as of August 1) if your credit score is “excellent,” meaning it is higher than 800. However, if your credit score falls below 640, the typical APR charged is 6.424%. You might have to pay nearly $100,000 extra in interest payments over 30 years if your credit score ranges between 620-639.

Mortgage Rates Today 

Mortgage rates have been slumping over the past few weeks, amid declining housing demand and global economic slowdown fears. The average interest rate for a fixed 30-year mortgage loan stood at 5.79% as of September 6, 2022. The rate has been fluctuating between 5.4%-5.8% last month. 

This means to qualify for a mortgage loan with a lower than 6% interest, you have to qualify as a “prime borrower” with a credit score of above 800.

See also:

• The 7 Best Conventional Mortgage Lenders

• Mortgage Lenders That Do Not Require Tax Returns

• Best Mortgage Lenders For Self-Employed Borrowers
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