Study Looks at Credit Scores' Impact on Home Payments

A new Zillow study assesses just how much more a homebuyer with fair credit will have to pay over the life of a 30-year mortgage than a borrower with excellent credit.

Generally, those with fair credit scores will pay 7 percent more over the course of their 30-year mortgage, yet the extra cost varies by region, as home prices and mortgage amounts, and Annual Percentage Rates (APR) do. Zillow policy advisor Alexander Casey writes that the effects of bad credit may be lasting longer than before, "As mortgage rates rise, more homeowners might hold onto their original purchase loan longer, even as their credit improves, potentially leaving many homeowners stuck a lot longer with the high cost of low credit.

Buying a home can be an important step toward long-term financial stability. But for the millions of Americans with rocky credit histories and low scores, achieving that stability can be a whole lot more expensive. A U.S. borrower with a credit score between 640 and 679 (often considered “fair”) could ultimately pay roughly $720 more per year in mortgage payments than if their credit were “excellent,” according to a Zillow analysis of APR terms offered to borrowers on Zillow Mortgages. 

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