Your credit score affects more than just whether you'll qualify for a mortgage. Your score also determines the interest rate you'll receive. The reason is simple: The higher your credit score, the less risk you pose to lenders. And with the less risk, lenders are able to offer lower rates. Think of credit scores and mortgage rates as a sliding scale. The higher your credit score, the lower your interest rate.
According to myFICO.com's FICO score and interest rate chart, typical rates on a 30-year, fixed rate loan run anywhere from 4.082 percent for a credit score of 760 to 5.671 percent for a credit score of 620. (This chart changes daily, so current rates will vary.) That may seem like an incremental difference, but in the world of mortgages, 1.5 percent makes a big difference in monthly payments. And your monthly payments are directly related to how much home you can afford.
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