CHARLOTTE, N.C.–Borrowers with lower credit scores are likely to be paying more in additional costs in mortgage.
According to findings released as part of LendingTree’s Mortgage Offers Report for December 2017, consumers with the highest credit scores (760+) were offered APRs of 4.26% in December, compared to 4.56% for consumers with scores of 680-719. The APR spread of 30 basis points between these score ranges was three points wider than in November and the widest since this data series began in April 2016, LendingTree reported.
“The spread represents nearly $15,000 in additional costs for borrowers with lower credit scores over 30 years for the average purchase loan amount of $233,586. The additional costs are due to higher interest rates, larger fees or a combination of the two,” said Tendayi Kapfidze chief economist at LendingTree, in a statement.
The report found that December’s best offers for borrowers with the best profile had an average annual percentage rate of 3.8% for conforming 30-year fixed purchase loans, up from 3.75% in November.
LendingTree said the data is drawn from actual loan terms offered to borrowers on its platform, and helps to empower consumers by providing additional information on how their credit profile affects their loan prospects.
In terms of refinance loans, the report found refinance loan offers were up one basis point to 3.7%.
For the average borrower, purchase APRs for conforming 30-year fixed loans offered on LendingTree’s platform were up 12 basis points to 4.42%, the highest since July 2016, the company said. It added the loan note rate hit its highest point since March 2016 at 4.32% and was up 14 basis points from November.
“We prefer to emphasize the APR as lenders often make changes to other fees in response to changing interest rates,” Kapfidze said in the statement.
The report further found that while refinance APRs for conforming 30-year fixed loans were up seven basis points to 4.31%, the credit score bracket spread widened to 24 from 20 basis points, amounting to $12,000 in extra costs over the life of the loan for lower credit score borrowers given an average refinance loan of $241,973, LendingTree reported.