Credit scores continue to impact the overall mortgage loan costs of borrowers. According to the Mortgage Offers Report for July released by LendingTree [1] on Wednesday, consumers with the highest credit scores (760+, representing the 65th percentile of borrowers) were offered an annual percentage rate (APR) of 4.84 percent, versus 5.13 percent for borrowers with scores in the range of 680-719.
The mortgage offers report [2] contains data from actual loan terms offered to borrowers on LendingTree by lenders, with the most quoted rates being for a hypothetical borrower with prime credit who makes a 20 percent down payment on a home. The report revealed that in July, average proposed purchase down payments declined by $1,000 to $58,191
According to LendingTree, mortgage rates vary depending upon parameters including credit score, loan-to-value, income and property type.
The report indicated that the APR spread of 29 bps between these score ranges was up two basis points from June. "The spread represents almost $15,000 in additional costs for borrowers with lower credit scores over 30 years for the average purchase loan amount of $232,054," the report said. The additional costs are due to higher interest rates, larger fees or a combination of the two.
The best mortgage loan offers during July for borrowers with the best credit profiles had an average APR of 4.31 percent for conforming 30-year fixed-rate purchase loans, down from 4.34 percent in the prior month. The report indicated that refinance loan offers were also down two basis points to 4.35 percent. For the average borrower, refinance APRs for conforming 30-year fixed-rate loans were also down two basis points to 4.98 percent.
For refinance loans, the report revealed, the credit score bracket had widened by two basis points to 22 basis points. The widening of this gap amounted to a little over $11,500 in additional costs over the life of a mortgage loan for borrowers with lower credit scores, on a refinance loan of $238,018.