Homebuyers with lower credit scores pay $104,000 more in mortgage fees


Today’s homebuyers can expect pay about 62% more per month to buy an American house at the usual price than a year ago. Zillow looked at credit scores compared to current mortgage rates and found that such monthly cost increases are exacerbated for millions of Americans with low credit scores or less than perfect credit histories.

A borrower with an “excellent” credit score — between 760 and 850 — can qualify for a 30-year fixed rate mortgage with an interest rate of 5.099%.1. For the same loan, a similar borrower with a “fair” credit score – between 620 and 639 – is entitled to a rate of 6.688%1. This is equivalent to a $288 difference in monthly mortgage payments and nearly $103,626 in interest over the term of a 30-year fixed loan, based on the current price of a typical U.S. home ($354,165)2.

“When considering buying a home, the best first step you can take is to fully understand your financial situation, what you can afford, and your outstanding debts or obligations,” said libby cooper, Vice President of Zillow Home Loans. “If you find that your credit is weak, take realistic steps to improve your credit score by doing things like disputing any reporting errors and repaying as many debts as possible. This could increase the amount of home loan you qualify for.”

The table below illustrates how a buyer’s credit profile plays an important role in the final cost of a home. Buyers who make increasing their credit score part of their first steps in the home buying process typically have more buying power and lower monthly payments.

The cost of buying a US home at the usual price based on credit scores3

FICO® Score

Annual Estimate
percentage rate1

Monthly payment

Total loan cost

























There is a direct correlation between credit security—having a strong credit history and structural access to credit offers—and higher homeownership rates. The homeownership rate is lower in counties that are more “credit poor,” meaning they are home to a large number of residents with poor or no credit histories. This cuts off millions of people – especially black and Latino residents – from the wealth-building benefits of real estate ownership. In addition, Black applicants are denied a mortgage at a rate 84% higher than white applicantsand credit history is the most commonly cited reason for these denials. Limited traditional financial services in black and other colored communities are a significant factor in the lack of credit history and the inability to establish a high credit score.

Fannie Mae and Freddie Mac recently adopted policies that include timely rent payments in their automated underwriting systems. Lenders and brokers may submit bank account data (with the borrower’s permission) to identify 12 months of fast rent payments to help potential borrowers qualify for a mortgage.

“While including timely rent payments does not change a borrower’s credit rating, it can have a positive impact on how lenders view a borrower’s creditworthiness. This decision shows how point of effective policy changes can help consumers build a strong financial foundation that unlocks homeownership,” says Cooper.

About Zillow Group:
Zillow Group, Inc. (NASDAQ: Z and ZG) is reinventing real estate to make it easier to open the next chapter in life. As the most visited real estate site in United StatesZillow® and its affiliates provide customers with an on-demand experience to sell, buy, rent or finance with transparency and ease.

Zillow Group affiliates and subsidiaries include Zillow®Zillow offers®Zillow Premier Agent®Zillow Home Loans™, Zillow Closing Services™, Zillow Homes, Inc., Trulia®Out East®DisplayTime®Interactive Bridge®dot loop®Street Easy® and HotPads®. Zillow Home Loans, LLC is an Equal Housing Lender, NMLS #10287 (www.nmlsconsumeraccess.org).

1 Based on FICO Loan Savings Calculator on myfico.com. Rates in effect at July 26, 2022.
2 According to Zillow Home Value Index.
3 Loan calculations assume a 20% down payment on the cost of a $354,165 with a 30 year fixed mortgage. The total cost of the loan includes the value of the loan and the cost of interest over the life of the loan.



About Author

Comments are closed.