In short risk-based pricing, the higher the risk the lender incurs the higher the mortgage rate you will be quoted on the new mortgage. This is especially true with conventional mortgages, not so much on the FHA variety. FHA unlike conventional loans does not discriminate to the degree conventional does based upon credit score.
Following credit score ranges are indicative of risk-based pricing on conventional loans…
620- 639 – highest mortgage rate/ pricing
640-679- higher mortgage rates and pricing although not as high as a score between 620-639
680- 700- pricing continues to improve as does mortgage rate
700-725- substantially lower priced mortgage
740-760- best priced mortgage rate and/or cost
The other factor influencing mortgage rate besides credit score is of course loan-to-value. The higher the loan-to-value, yep you guessed right, the higher the interest rate. The lowest and best possible mortgage rates and terms are awarded to consumers whose credit scores were 740 or higher and have it least 30% equity in their home on single-family primary residence transactions. That’s not to say if you don’t meet that criteria you will not get a competitive interest rate, but expect the pricing to be different than if you met the major linchpin criteria.
If You have a mortgage scenario we can give you an accurate rate quote on, send us your loan data, we will respond fast with accurate rates and terms.