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How FICO Scores Affect Interest Rates

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According to a mortgage consultant, the below represents the differences among FICO scores and how that relates to the interest rate borrowers are charged. This scenario assumes the borrower with bad credit is putting down 10% of the purchase price in cash and met these requirements.

1. FICO Score of 600 to 640: + 1.625% over prevailing rate. This means if a borrower with good credit is paying 5.875%, your interest rate would be 7.5%.

$200,000 amortized loan at 7.5% would give you a monthly payment of $1,398.

2. FICO Score of 560 to 580: +2.875% over prevailing rate. This means if a borrower with good credit is paying 5.875%, your interest rate would be 8.75%.
 
$200,000 amortized loan at 8.75% would give you a monthly payment of $1,573.

3. FICO Score of 540 to 559: +3.425% over prevailing rate. This means if a borrower with good credit is paying 5.875%, your interest rate would be 9.3%.

$200,000 amortized loan at 9.3% would give you a monthly payment of $1,653.

4. FICO Score Under 540 to 500: +3.875% over prevailing rate. This means if a borrower with good credit is paying 5.875%, your interest rate would be 9.75%.

$200,000 amortized loan at 9.75% would give you a monthly payment


5. FICO Score Under 500: +6.25% over prevailing rate. This means if a borrower with good credit is paying 5.875%, your interest rate would be 12%. With a FICO of less than 500, you will not qualify for a 90% loan, but you may qualify for a 65% loan, therefore, you need to increase your down payment from 10% to 35%.

$200,000 amortized loan at 12% would give you a monthly payment of $2,057.

Source: About.com