Welcome to Joe Knows Mortgages MINUTE, where we answer your mortgage questions.
On this week’s Joe Knows Mortgages MINUTE, we answer the question:
How does my credit score affect my loan?
Most loans have a risk-based pricing model. In other words, the loan is going to be priced according to the risk that the lender takes by making the loan. Through statistics, lenders have realized that loans with lower credit scores ultimately present a higher risk than those with higher credit scores. If you have a higher credit score, you will typically pay less for a loan than someone with a lower credit score.
On a conventional, conforming loan, typically for every 20 points a borrower is under 740 on the credit score, there may be a slightly higher cost. Higher costs come in the form of interest rates or fees.
While there are many types of loans, the actually rates and fees may vary from loan type to loan type, so please be sure to speak with a reputable lender to get the options to see which loan may work best for your specific situation.
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