Credit scores are getting more important as mortgage rates rise and those with a higher credit score will save more, according to LendingTree's latest Mortgage Offers Report.
The report revealed that consumers with the highest credit scores (760-plus) received an average annual percentage rate (APR) of 5.12 percent, versus 5.42 percent for consumers with scores of 680 to 719. The APR spread of 30 basis points between these score ranges remained unchanged from September. "For the average purchase loan amount of $233,938, the spread represents over $15,000 in additional costs for borrowers with lower credit scores over 30 years. The additional costs result from higher interest rates, larger fees or a combination of the two," the report said.
October's best mortgage offers for borrowers with the best profiles, that are defined by LendingTree as the 95th percentile of borrowers had an average APR of 4.61 percent for conforming 30-year fixed-rate purchase loans, up from 4.39 percent in September.
However, for the average borrower, the report found that the purchase APR for conforming 30-year fixed-rate loans was 5.27 percent, up by 18 basis points from September. It revealed that the loan note rate for these borrowers at 5.14 percent was the highest rate of the year.
Down payments also declined over September with the average proposed down payment falling by about $3,600 to $60,361.
The APR on refinance loan offers also saw an increase of 22 basis points in October to 4.62 percent for borrowers with the best profiles, while the APR for conforming 30-year fixed refinance loans increased by 17 basis points to 5.26 percent. The report found that the spread between credit score brackets of 760-plus and 680 to 719 remained unchanged at 24 basis points, which would result in nearly $13,000 in extra costs over the life of the loan for borrowers with lower credit scores, given an average refinance loan of $238,447.
For borrowers shopping around for the best loan rates, LendingTree found that homebuyers could have seen a median lifetime savings of $29,369 in interest on a $300,000 loan by comparison shopping for the best mortgage rates.