Will I Get a Better Interest Rate with a Higher Credit Score?
by Steve Kappre, NJ Loan Officer
The simple answer: Maybe, but there are many variables.
As a rule of thumb, the higher the credit score the better the rate you will receive (or the less fees you will pay). This is most relevant when talking about conventional loan programs. For the best rates and options you want a credit score of 740 of more.
What can make my rate higher?
- Credit scores below 740
- A property's status: Second home or investment property loans
- Type of property: Condo vs. single family vs. mobile home vs. multi-unit
- Loan amount: Conforming loan vs. jumbo vs. super jumbo
And the list can go on and on. Each variable can add to the interest rate and/or the cost of the loan. Some combinations can get very expensive as well as very limiting on your financing options.
FHA and VA loans are different than conventional. Many lenders will be able to offer the same rate for an FHA or VA loan if you have a 620 or better credit score. Some lenders will require a 660 or better credit score to get a better rate (or less fees).
What you may find from lender to lender is that the rates offered or the options allowed may fluctuate for the exact same program and financing scenario. On top of the guidelines that Fannie Mae, Freddie Mac, FHA, or VA set, lenders may place their own restrictions, commonly known as lender overlays. Lenders can go as far as to not allow certain loan options even though FHA, Fannie Mae, or Freddie Mac may allow the option themselves.
Keep doing you research. If you find yourself getting different answers to the same questions, you are probably talking to either loan officers that do not know what they are talking about, or one or more lenders you are talking to are telling you their guidelines based off of their particular lender overlays.
So the final answer is ...
Higher credit always helps - but isn't always required to get the best rates. Many lenders can offer the same rates for certain loans whether your credit score is 620, 720, or 820.
Steve Kappre is a mortgage loan officer in New Jersey. For more info or questions feel free to contact Steve.
- NJ First Time Home Buyer
- Purchase, refinance, rehab loans
- Conventional, FHA, USDA, VA, HMFA, First Time Home Buyer, Police and Fire, Live Where You Work, and more