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How Credit Scores Reflect on APR Changes

The average APR went up only slightly in the last month, at least for those with the best profiles, according to the LendingTree Mortgage Offers Report for August 2018. For these buyers, annual percentage rate (APR )on 30-year fixed purchase loans went from 4.31 percent in July to 4.32 percent in August, while offers for refinance loans were unchanged at 4.35 month over month. LendingTree noted that those with the “best” credit profiles were determined by who received the best offers through LendingTree’s marketplace.

APRs for conforming 30-year fixed loans for the average borrower stayed the same month over month, at 4.99 percent, with an average loan amount of $230,645 and an average down payment of $56,933, according to LendingTree data. The loan note rate of 4.87 percent is the lowest since April.

Buyers with credit scores of 760 and up, representing the highest percentile of borrowers had APRs of 4.84 percent and an average down payment of 56,933, compared to 5.13 percent for borrowers with scores of 680 to 719, with an average down payment of $36, 232. Those with the lowest scores of 620-639 had an average APR of 5.62 percent, and a higher average down payment of $54,300.

The average loan size of $230,645 saw an APR spread of 29 bps, meaning almost $15,000 in additional costs compared to 30 years for borrowers with lower credit scores. The report indicated that the high costs were due to higher interest rates and larger fees, or in some cases a combination of the two.

For refinance APRs for conforming 30-year fixed loans remained unchanged, at 4.98% for the average borrower. Meanwhile, the credit score bracket spread increased to 23 bps, meaning a little over $12,000 in extra costs over the life of the loan for lower-credit-score borrowers, given an average refinance loan of $239,517. Those with a credit score of 760 or higher saw a higher average loan amount of $246,389, compared to an average loan amount of $219,317 for borrowers in the 620-639 credit score range.

Find the full report from LendingTree here.

About Author: Seth Welborn

Seth Welborn is a Harding University graduate with a degree in English and a minor in writing. He is a contributing writer for MReport. An East Texas Native, he has studied abroad in Athens, Greece and works part-time as a photographer.

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