Becoming a homeowner has become increasingly more challenging, with the median monthly mortgage payment reaching an all-time high of $2,661 (at a 7.19% mortgage rate), according to Redfin.com. They also found the median sale price of a home to be $374,975. And sky-high mortgage rates have left both homebuyers and owners feeling increasingly pessimistic about the housing market outlook.
So, if you're in the market for a mortgage or a refinance, it’s more important now than ever to ensure you can secure the lowest mortgage rate possible. One way you can find the best 30-Year mortgage rates is by prioritizing a good credit score.
Credit score impact on mortgage rates
Lenders take into account a variety of factors when determining the interest rate on your mortgage, including your down payment, desired loan term and the price of the property. However, the biggest factor determining your mortgage rate is your credit score. Most lenders will take into account your FICO score, which can range from 300 to 850, or from poor to exceptional credit.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
- 800 or higher: Exceptional
- 740-799: Very good
- 670-739: Good
- 580-669: Fair
- 579 or lower: Poor
To qualify for a mortgage loan, you’ll likely need a credit score of at least 620. However, having an even higher credit score can ease the financial burden of a mortgage, as it can help you score lower rates. And the knock-on benefits continue — securing a low mortgage rate can help lower your monthly payments substantially, as shown in this data from MyFICO.
The chart shows how much you’d pay on current rates as of November 30, 2023, based on a 30-year fixed mortgage of $350,000.
| FICO Score | APR | Monthly Payment | Total Interest Paid |
|---|---|---|---|
| 760-850 | 6.757% | $2,272 | $467,820 |
| 700-759 | 6.979 % | $2,324 | $486,505 |
| 680-699 | 7.156 % | $2,365 | $501,523 |
| 660-679 | 7.37 % | $2,416 | $519,821 |
| 640-659 | 7.8 % | $2,520 | $557,037 |
| 620-639 | 8.346 % | $2,653 | $605,113 |
How much you can save
Based on data from the chart above, if you start with a credit score of 620-639, here’s how much you’d save over the course of your mortgage by boosting your credit score.
- If your score changes to 640-659, you could save an extra $48,076
- If your score changes to 660-679, you could save an extra $85,292
- If your score changes to 680-699, you could save an extra $103,590
- If your score changes to 700-759, you could save an extra $118,608
- If your score changes to 760-850, you could save an extra $137,293
Use our tool to find a mortgage deal that's right for you.
How to improve your credit score
Your credit score matters to lenders as it shows them how likely you’ll be able to repay your loan. If you have a higher credit score, lenders won’t see you as a risky borrower. And while you can still get approved for a mortgage with a bad credit score, you won’t be able to secure the lowest rates possible. If you’re looking to save on your mortgage rates, try following these steps to boost your overall credit score before applying.
Check your credit report: Before applying for a mortgage, get a copy of your credit report. You’ll be able to see a complete rundown of your credit history, helping you identify areas of your credit that are hurting your score, while also checking for any inaccuracies in the report. Having errors on your credit report is more common than you may think, so it’s important to get those fixed, by filing a dispute if any are found.
Make on-time payments: Payment history is the largest factor affecting your credit score, accounting for 35% of your total score. Because of this, it’s vital to always make payments on time, as missing payments can significantly decrease your score.
Pay off credit card balances: Credit utilization is the ratio between any debt you have compared to your total credit limit, and it makes up 30% of your overall credit score. Therefore, keeping your credit utilization ratio as low as possible can help you up your overall credit score. A good rule of thumb is to keep your credit utilization below 30%.
Related Content
-
Eight Key Steps to Take When Investing in the Stock MarketThe stock market can be a confusing place for beginners, but it doesn't have to be.
-
Confused by Annuities? Making Sense of the Different TypesMany investors aren't sure if annuities are a good option for meeting financial goals. Let's look at the different categories, along with their pros and cons.
-
How Retirees Can Downsize In Today's Housing MarketRising prices, higher interest rates and a tight supply of smaller homes present challenges. But retirees have an edge.
-
Five Housing Markets On the RiseStudy shows homes in five markets are going under contract in less than two weeks, despite a broader national housing market slowdown. Which cities are bucking the trend and why?
-
House Hacking: Make Money Off Your HomeHouse hacking involves renting out a part of your residence to create passive income. Here's how it works.
-
Steep Mortgage Rates Stunt Home Buying PowerThe high-rate environment of today’s housing market leaves potential homebuyers with less purchasing power than last year, study shows.
-
Monthly Housing Payments Hit All-Time High, Study ShowsMonthly housing payments hit an all-time high in September, a report from Redfin shows, reflecting the multi-decade high for mortgage rates and continued rise in home prices.
-
When Renting Is Smarter Than Buyingreal estate There are some situations when renting is smarter than buying. You're not necessarily throwing your money away when you rent.
-
Find the Best 30-Year Mortgage RatesHere's how to find the best 30-year mortgage rates
-
Best Time of Year to Buy A HouseYou may find a good home deal at any time of year, but certain seasons or even months have the perfect blend of inventory, supply and price. Here's when to look.
