Mortgage rates by credit score: Here’s what your score gets

What mortgage rate will I get with my credit score?

Mortgage rates by credit score are not one-size-fits-all.

While a credit score of 740 typically secures the lowest rates, borrowers with moderate credit may still find competitive options through specific loan types.

Remember, your credit score is just one piece of the puzzle. So let’s explore all of your options to make sure you’re getting the lowest rate possible for your credit score.

In this article (Skip to...)

• Credit scores and rates
• Mortgage rates by credit score
• Monthly payments by score
• Mortgage rates by loan type
• Current mortgage rates
• Mortgage refinance rates
• FAQ

How credit scores affect mortgage rates

Your credit score significantly impacts the interest rate you’ll receive on your mortgage.

This score is a numerical measure of your creditworthiness, based on factors like payment history, total debt, types of credit used, and length of credit history. Higher scores generally lead to lower mortgage rates, as lenders perceive you as a lower-risk borrower.

Credit scores are determined by credit bureaus like Equifax and Experian. Their comprehensive assessment helps lenders evaluate the risk of lending to you.

Credit tiers and their impact on mortgage rates

Mortgage lenders often use “credit tiers” to determine interest rates, which are based on FICO scores. FICO, short for Fair Isaac Corporation, is a widely used credit scoring model. Here’s a breakdown of typical credit tiers and how they affect mortgage rates:

≥ 740: Lowest mortgage rates

720-739

700-719

680-699

660-679

640-659

620-639

< 620: Highest mortgage rates

It’s important to note that even small differences in your credit score can have a significant impact on your mortgage rate. For example, if your score is 718 or 719, improving it by just a few points could bump you into a higher tier with a lower interest rate. Conversely, if your score drops to a lower tier before closing, you may face a higher mortgage rate.

While your credit tier is an important factor in determining your mortgage rate, other aspects like loan type (conventional, FHA, VA, etc.), down payment size, and property type (single-family home, condo, etc.) also play a role. For instance, FHA loans allow lower credit scores but may have higher interest rates compared to conventional loans for borrowers with good credit.

Mortgage rates by credit score

Mortgage interest rates can vary significantly based on credit scores, leading to substantial differences in monthly mortgage payments and long-term interest costs for homeowners.

FICO, the biggest credit scoring company in American real estate, provides a helpful online calculator that illustrates how much mortgage rates can differ based on credit scores. Here’s an example of how average annual percentage rates (APRs) varied by credit score in mid-2024:

*Average APR from myFICO.com is for sample purposes only and based on a 30-year fixed-rate mortgage. Your own interest rate will be different..

Mortgage payments by credit score

According to the Mortgage Bankers Association, the average loan amount for a new single-family home purchase was $405,400 in March of 2024.

We’ll use that loan amount, and the APR estimates from FICO (above), as an example to show how credit tiers impact mortgage payments and long-term interest costs. If you compare the highest and lowest credit score tiers, the borrower with better credit saves about $445 per month and $160,200 in total interest over the life of their mortgage loan.

*Payment examples and APRs sourced from myFICO.com. Payments based on a loan amount of $405,400 and a 30-year fixed-rate mortgage loan. Your own interest rate and monthly payment will be different.

In addition to mortgage rates by credit score, home prices and mortgage insurance can greatly impact your monthly mortgage payments, especially in high-cost areas like New York. Using a mortgage calculator can help you estimate these costs and compare different loan options.

Conventional loans require private mortgage insurance (PMI) for down payments less than 20% of the home price, while FHA loans have both upfront and annual mortgage insurance premiums (MIP).

The type of loan you choose, such as a fixed-rate or adjustable-rate mortgage (ARM), can also affect your interest rate and long-term costs. Consider your financial situation and goals when selecting a loan for your primary residence.

Mortgage rates by loan type

In addition to credit score, mortgage rates also vary by loan type. Here are some common loan types and their typical rates.

Conventional loan rates

Conventional loans are the most common type of mortgage and typically offer competitive rates for borrowers with good credit. Rates may be slightly higher than for government-backed loans like FHA or VA. Today’s mortgage rate for conventional loans is % (% APR).

FHA loan rates

The Federal Housing Administration guarantees FHA loans, which is why they often have lower rates than conventional loans. Today’s mortgage rate for FHA loans is % (% APR). These loans can be a good option for first-time home buyers with lower credit scores or limited down payment funds.

VA loan rates

VA loans are available to eligible military service members, veterans, and their spouses. They often feature lower rates than conventional loans and don’t require a down payment. Today’s mortgage rate for a VA loan is % (% APR).

USDA loan rates

USDA loans are designed for rural homebuyers and offer competitive rates for those who qualify. These loans typically require a minimum credit score of 640.

Jumbo loan rates

Jumbo loans are mortgages that exceed conforming loan limits set by Fannie Mae and Freddie Mac. Due to the higher loan amount, jumbo loans often have slightly higher rates than conforming loans.

Current mortgage rates

Mortgage rates by credit score are heavily influenced by the Federal Reserve’s adjustments of the federal funds rate. This is the rate banks charge each other for overnight loans.

• When the Fed raises this rate, mortgage rates usually go up. This means higher monthly payments for homeowners.
• When the Fed lowers the federal funds rate, mortgage rates often drop, making home loans cheaper.

These national average rates affect how much home buyers can afford, which can change demand in the housing market. Understanding these rates is key for those looking to make informed decisions about homeownership.

*Current mortgage rates and annual percentage rates for sample purposes only. See our full list of interest rate assumptions here.

Mortgage refinance rates by credit score

Your credit score has a significant impact on refinance rates, just like it does on purchase mortgage rates. Lenders use your credit score to assess the risk of loaning you money, and this risk assessment determines the interest rate you’re offered.

Generally, homeowners with higher credit scores are rewarded with lower refinance rates, while those with lower scores may face higher rates. However, refinance rates may be slightly different from purchase mortgage rates due to the lower risk for lenders, as the homeowner has already been making regular mortgage payments.

Here’s an example of how refinance rates could vary by credit score tier:

*Refinance APR estimates are for sample purposes only and based on a 30-year fixed-rate mortgage refinance. Your actual rate will depend on your personal finances.

Cash-out refinance rates by credit score

Cash-out refinances, which allow homeowners to access their home equity by refinancing their mortgage for a higher amount, typically come with slightly higher interest rates compared to traditional refinances. This is because cash-out refinancing is considered riskier for lenders, as the homeowner is taking on more debt.

Here’s an example of how cash-out refinance rates might look based on credit score tiers:

*Cash-out refinance APR estimates are for sample purposes only and based on a 30-year fixed-rate mortgage refinance. Your actual rate will depend on your personal finances.

Mortgage refinancing tips and options

If you’re considering refinancing your mortgage, it’s a good idea to check your credit score and compare rates from multiple lenders. You can use a mortgage calculator to estimate your new monthly payments and see how much you could save by refinancing.

Keep in mind that refinancing involves going through the mortgage application process again, and your credit score will be a key factor in determining your interest rate. If you’re considering a cash-out refinance to tap into your home equity for a short-term expense, like a home renovation, you might face higher rates than you would for a standard rate-and-term refinance.

Some tips for homeowners looking to refinance:

• Check your credit report for errors and dispute any inaccuracies.
• Pay down existing debts to lower your debt-to-income ratio.
• Make all mortgage and other debt payments on time.
• Avoid opening new credit accounts or making large purchases before refinancing.
• Compare refinance rates from multiple lenders to find the best deal.

Even if you have a lower credit score, you may still have refinance options. For example, FHA Streamline Refinance and VA Interest Rate Reduction Refinance Loan (IRRRL) programs have more lenient credit requirements than traditional refinances.

Ultimately, understanding how your credit score impacts your refinance rate is key to making an informed decision about whether refinancing is right for you. By taking steps to improve your credit and shopping around for the best rates, you can potentially save thousands of dollars over the life of your mortgage.

Why your credit score impacts your mortgage rate

Your credit score helps lenders assess the risk of loaning you money. A higher score indicates you’re a lower-risk borrower, which usually translates to a lower interest rate. Conversely, a lower score suggests you’re a higher-risk borrower, so lenders typically charge a higher rate to offset that risk.

Risk-based pricing and mortgage rates

Conventional mortgage loans are subject to “risk-based pricing,” which factors your credit score into your rate and fees. The Consumer Financial Protection Bureau (CFPB) defines risk-based pricing as offering different interest rates or loan terms based on the estimated risk that consumers will fail to pay back their loans.

Each lender uses its own process to determine risk, considering factors like credit score, employment status, income, and outstanding debts. Because each lender assesses risk differently, it’s important to shop around and compare personalized quotes to find the best rate for your credit score.

Other factors that affect your mortgage rate

While credit scores are a key component in determining your mortgage rate, there are several other factors that lenders take into account. These elements can significantly influence the rate you’re offered and ultimately affect your monthly payments and the total cost of your mortgage.

Down payment amount

The size of your down payment plays a significant role in determining your mortgage rate, as it directly impacts the loan-to-value ratio (LTV). A higher down payment typically means a lower LTV ratio, which reduces the lender’s risk. This can often lead to a lower interest rate for the borrower.

Loan amount

The total amount you borrow can impact your mortgage rate. Larger loan amounts sometimes lead to higher interest rates, as they represent a greater risk to the lender. On the other hand, smaller loan amounts typically carry less risk and might qualify for lower rates.

Debt-to-income ratio

Your debt-to-income ratio (DTI) compares your total monthly debt payments to your gross monthly income. A lower DTI ratio suggests you have a good balance between debt and income, which can lead to lower mortgage rates.

Discount points

Buying discount points upfront can lower your mortgage rate. Discount points, also called mortgage points, are fees paid directly to the lender at closing in exchange for a reduced interest rate. This can be a way to lower your overall interest costs over the life of the loan.

Closing costs

Closing costs, including origination fees, can influence your mortgage rate. If you choose not to pay these fees upfront and instead roll them into the loan, it can result in a higher interest rate.

How to get the best mortgage rate for your credit score

Comparison shopping for your mortgage can make a huge difference. The CFPB says failing to comparison shop costs the average homebuyer approximately $300 per year and many thousands over the life of the loan.

But before you even get to the mortgage shopping phase, you can work on improving your odds for a lower rate.

• Save for a bigger down payment amount than the minimum required.
• Pay down existing debts to lower your debt-to-income ratio.
• Order a copy of your credit report and check for errors.
• Pay every bill on time to boost your credit score.
• Reduce your credit card balances below 30% of the credit limits.
• Avoid opening or closing credit accounts in the months before applying.

You should also consider working with a housing counselor. They can help assess your finances and credit to determine when you’re ready to apply for a mortgage.

With some upfront preparation, you can get the lowest possible mortgage rate for your credit score and save on your home loan.

FAQ: Mortgage rates by credit score

Check your mortgage rates by credit score

Understanding the impact of your credit score on mortgage rates is important, but remember, it’s just one piece of the puzzle.

Along with mortgage rates by credit score, lenders also consider factors like loan type and term length (such as 30 or 15 years), as well as the current state of the market. Even if you have a lower credit score, there are strategies—like obtaining a rate lock—to secure a competitive rate from the best mortgage lenders.

Eager to discover what mortgage rate you qualify for? Consider applying for mortgage pre approval or click the links below to compare rate quotes from multiple lenders, without any commitment.