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Everyone knows that interest rates are impacted by credit scores. The lower the credit score, the higher the interest rate. But hardly anyone understands the impact of a lower credit score to your home purchasing power. It is a lot more than everyone understands, and even mortgage loan officers.

If you have an average credit score of 690 and want to purchase a single family home with 5% as a down payment. You look at a particular home and figure a monthly payment of $2,500. including principal and interest, property taxes, home insurance and mortgage insurance.  

Sales Price:                 $318,000

Loan Amount:             $301,750

Interest Rate:             7.25%

Total Payment:           $2,499.87

If the borrower raised her / his FICO® by 10 points – only 10 points, the borrowing power for that home buyer jumps $13,000, all for the same payment. Here is an outline of the new profile:

Sales Price:                 $332,000

Loan Amount:             $314,750

Interest Rate:             7.00%

Total Payment:           $2,498.63

An increase of $13,000 for the same payment!


This happens all along the credit score spectrum. But loan officers are not even aware of how much their purchasing power changes by increasing their FICO Scores just a few points. It is usually $10,000’s of thousands of dollars.

Mortgage FICO Scores are like grades. They are as follows:

780 and above

760 to 779

740 to 759

720 to 739

700 to 719

680 to 699

660 to 679

640 to 659

640 and below

Increasing your scores to the next grade can be substantial.  Since mortgage lenders never discuss this with their clients, I will be talking more about this in the coming weeks and where you can find this great information.

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