SEATTLE, May 15, 2018 /PRNewswire/ -- Homebuyers with a
lower credit score pay thousands of dollars more for the same home
than a buyer with an excellent credit score.
A new Zillow® analysis[i] finds that nationally, a borrower with
an "excellent" credit score could get a mortgage with a 4.50
percent Annual Percentage Rate. A similar borrower with a "fair"
credit score could get a 5.10 percent rate. Over the lifetime of a
30-year mortgage, this means a buyer with a fair credit score can
end up spending $21,000 more than a
buyer with an excellent credit score for the typical U.S. home.
That difference is magnified in expensive markets. In addition
to high home prices, the penalty for a lower credit score tends to
be higher in more expensive areas. In San Jose, where the median
home value is $1.3 million, a buyer
with a lower credit score can end up paying $129,000 more than a buyer with an excellent
credit score over the full life of the loan.
Even if a homeowner doesn't pay out the full 30-year term on a
loan, the annual costs of a fair credit score can add up. A buyer
with a fair credit score could pay $700 more every year on the typical U.S. home
than someone with an excellent score.
A third of all buyers said determining how much home they could
afford was a challenge, making it the most frequently named
financing concern during the home buying process[ii]. Beyond the
list price of a home, other costs like mortgage interest, property
taxes and homeowners insurance can add up, impacting the overall
affordability for buyers.
"When you buy a home, your financial history determines your
financial future," said Zillow senior economist Aaron Terrazas. "Homebuyers with weaker credit
end up paying substantially higher costs over the lifetime of a
home loan. Of course, homeowners do have the option to refinance
their loan if their credit improves, but as mortgage rates rise
this may be a less attractive option."
Homebuyers with excellent and fair credit scores in Pittsburgh see the smallest difference in
mortgage rates, and as a result, also see the smallest difference
in lifetime mortgage costs among the country's 35 biggest markets.
A buyer with a fair credit score would pay about $9,000 more on the median Pittsburgh home than someone with excellent
credit.
Metro
|
Median
Home Value
March 2018
|
Estimated
APR with
Excellent
Credit
|
Estimated
APR with
Fair Credit
|
Estimated
Total Home
Cost with
Excellent
Credit
|
Estimated
Total
Home Cost
with Fair
Credit
|
United
States
|
$213,100
|
4.50%
|
5.10%
|
$311,000
|
$332,000
|
New York,
NY
|
$431,600
|
4.44%
|
5.04%
|
$625,000
|
$670,000
|
Los Angeles-Long
Beach-Anaheim, CA
|
$645,200
|
4.50%
|
5.12%
|
$942,000
|
$1,011,000
|
Chicago,
IL
|
$218,300
|
4.54%
|
5.09%
|
$320,000
|
$341,000
|
Dallas-Fort Worth,
TX
|
$227,400
|
4.61%
|
5.09%
|
$336,000
|
$355,000
|
Philadelphia,
PA
|
$228,200
|
4.60%
|
5.09%
|
$337,000
|
$356,000
|
Houston,
TX
|
$196,200
|
4.58%
|
5.11%
|
$289,000
|
$307,000
|
Miami-Fort
Lauderdale, FL
|
$269,500
|
4.49%
|
5.07%
|
$393,000
|
$420,000
|
Atlanta,
GA
|
$198,000
|
4.59%
|
5.12%
|
$292,000
|
$310,000
|
San Francisco,
CA
|
$938,200
|
4.53%
|
5.13%
|
$1,374,000
|
$1,472,000
|
Detroit,
MI
|
$148,000
|
4.75%
|
5.18%
|
$222,000
|
$234,000
|
Riverside,
CA
|
$357,100
|
4.44%
|
5.06%
|
$517,000
|
$556,000
|
Phoenix,
AZ
|
$252,800
|
4.51%
|
5.09%
|
$369,000
|
$395,000
|
Seattle,
WA
|
$492,200
|
4.43%
|
5.02%
|
$712,000
|
$763,000
|
Minneapolis-St Paul,
MN
|
$259,100
|
4.50%
|
5.06%
|
$378,000
|
$403,000
|
San Diego,
CA
|
$585,300
|
4.45%
|
5.09%
|
$850,000
|
$914,000
|
St. Louis,
MO
|
$159,600
|
4.70%
|
5.18%
|
$238,000
|
$252,000
|
Tampa, FL
|
$201,000
|
4.57%
|
5.09%
|
$296,000
|
$314,000
|
Baltimore,
MD
|
$264,400
|
4.53%
|
5.09%
|
$387,000
|
$413,000
|
Denver, CO
|
$396,800
|
4.45%
|
5.05%
|
$576,000
|
$617,000
|
Pittsburgh,
PA
|
$137,900
|
4.87%
|
5.26%
|
$210,000
|
$219,000
|
Portland,
OR
|
$389,100
|
4.45%
|
5.06%
|
$564,000
|
$606,000
|
Charlotte,
NC
|
$194,400
|
4.57%
|
5.09%
|
$286,000
|
$304,000
|
Sacramento,
CA
|
$401,900
|
4.47%
|
5.00%
|
$584,000
|
$622,000
|
San Antonio,
TX
|
$183,600
|
4.64%
|
5.10%
|
$272,000
|
$287,000
|
Orlando,
FL
|
$224,200
|
4.55%
|
5.07%
|
$329,000
|
$349,000
|
Cincinnati,
OH
|
$156,400
|
4.74%
|
5.19%
|
$235,000
|
$247,000
|
Cleveland,
OH
|
$139,100
|
4.80%
|
5.28%
|
$210,000
|
$222,000
|
Kansas City,
MO
|
$177,300
|
4.66%
|
5.15%
|
$264,000
|
$279,000
|
Las Vegas,
NV
|
$260,200
|
4.49%
|
5.08%
|
$379,000
|
$406,000
|
Columbus,
OH
|
$178,900
|
4.63%
|
5.12%
|
$265,000
|
$281,000
|
Indianapolis,
IN
|
$150,100
|
4.70%
|
5.23%
|
$224,000
|
$238,000
|
San Jose,
CA
|
$1,252,400
|
4.54%
|
5.13%
|
$1,836,000
|
$1,965,000
|
Austin, TX
|
$291,600
|
4.50%
|
5.07%
|
$425,000
|
$454,000
|
Zillow
Zillow is the leading real estate and rental
marketplace dedicated to empowering consumers with data,
inspiration and knowledge around the place they call home, and
connecting them with the best local professionals who can help. In
addition, Zillow operates an industry-leading economics and
analytics bureau led by Zillow's Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of
economists and data analysts produce extensive housing data and
research covering more than 450 markets at Zillow Real Estate
Research. Zillow also sponsors the quarterly Zillow Home Price
Expectations Survey, which asks more than 100 leading economists,
real estate experts and investment and market strategists to
predict the path of the Zillow Home Value Index over the next five
years. Launched in 2006, Zillow is owned and operated by Zillow
Group, Inc. (NASDAQ:Z and ZG), and headquartered in Seattle.
Zillow is a registered trademark of Zillow, Inc.
[i] Zillow analyzed more than 100,000 mortgage quotes from
lenders participating in Zillow Mortgages between March 18 – May 8,
2018, limited to 30-year fixed rate conventional and
conforming purchase loans for borrowers with no self-reported
history of foreclosure or bankruptcy. This data was used to predict
quoted annual percentage rates based on information provided to
lenders for typical borrowers with varying credit scores. We
grouped credit scores into five categories: Excellent > 760,
Very Good 720 – 759, Good 680 – 719, Fair 640 – 680, Poor < 640.
Using those APR estimates for different regions we calculated the
total cost of buying the median valued home in each metro with a
20% down payment and a 30-year fixed rate mortgage. The
sample size for poor credit scores was too small to predict APR
estimates.
[ii] https://www.zillow.com/report/2017/buyers/challenges/
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SOURCE Zillow