Average mortgage rates by credit score, and how to get the lowest possible APR (2024)

If you’re applying for a home loan (or perhaps considering refinancing), your credit scores affect your mortgage rate more than almost any other consideration.

While it’s possible to get approved for a conventional loan with credit scores as low as 620, your best bet to secure a favorable interest rate is to have scores in the upper 700s or higher. In fact, the median credit score for newly originated mortgages in the first quarter of 2024 was 770, according to the Federal Reserve Bank of New York.

Taking a look at average mortgage rates by credit score can help you estimate your potential APR and understand your potential loan costs — but it’s also critical to take steps to improve your credit before you borrow.

Average mortgage rates by credit score

Mortgage interest rates change daily, so it’s important to review current rates as you consider your options. With that in mind, here’s the average interest rate for a handful of credit score ranges, as of June 18, 2024:

How rates impact your monthly and overall cost

The impact of your mortgage rate depends on several factors, including how much you borrow, your loan term and more. You’ll also want to consider other monthly costs, such as property taxes and home insurance.

That said, it’s important to understand how much you can save on your monthly loan payment — and overall repayment — by improving your credit before applying for a mortgage.

Here’s what your monthly dues and total interest costs might look like on a 30-year fixed term with a $329,800 balance (the median loan amount for new mortgages in the first quarter of 2024, according to ATTOM Data Solutions):

As you can see, even slightly higher interest rates can cost you tens of thousands of dollars more. To get a more accurate picture of your costs, consult with a loan officer who can provide a personalized loan estimate.

Average mortgage loan rates by state

Mortgage interest rates are influenced by various factors, including where you plan to buy a home. But while mortgage rates can vary by state, they generally follow the same trends as national mortgage rates. If they go up (or down) nationally, they’ll likely jump (or fall) anywhere from Alabama to Wisconsin.

With that in mind, here’s the average mortgage APR for each state for borrowers with a credit score of 760 or above, as of June 18, 2024:

Note that VA and USDA loans don’t have a minimum credit score set by the government agencies that back them. However, you can generally expect lenders to have credit score requirements similar to those of conventional loans.

Expert’s take: “Credit scores vary by lender and program because all lenders decide their risk tolerance for making a loan,” said Aaron Gordon, a senior loan officer at Guild Mortgage.

Other factors that impact your mortgage interest rate

Although your credit scores affect your mortgage rate more than most other factors, it’s not the only one lenders consider. Here are some of the other elements that can impact how much your loan will cost:

• Income: In addition to your annual earnings, lenders consider your job stability and income sources.
• Debt-to-income ratio: Lenders calculate your debt-to-income ratio (DTI) by dividing the sum of your monthly debt payments (including your proposed housing payment) by your gross monthly income. The lower your DTI, the better your mortgage rate.
• Loan amount: The more you borrow, the higher the risk for your lender in the event that you default. As a result, larger loan amounts typically carry higher interest rates, especially if you’re comparing jumbo loans to conforming conventional loans.
• Down payment: The amount you put down shows your commitment to the purchase and the property. While minimum down payment requirements can be low — even 0% in some cases — a larger down payment typically results in a lower interest rate.
• Repayment term: If you can afford a higher monthly payment, choosing a 15-year over a 30-year term can deliver a lower interest rate.
• Interest rate type: Mortgage lenders typically offer fixed- and adjustable-rate loans, the latter of which offers a fixed rate for a set period, after which the rate fluctuates with market interest rates. Generally, adjustable-rate mortgages offer lower starting rates than fixed-rate loans.
• Loan type: Different loan programs have different approaches to determining interest rates. Consult with a loan officer to get estimates for different types of mortgages.

Strategies to improve your credit scores

As you can see above, your credit scores directly affect your mortgage interest rate. Improving your scores from the lower 600s to the upper 600s alone could save you hundreds of dollars per month.

• Check your credit scores to know where you stand and estimate your expected rate. Also, make sure you understand the different factors that influence your scores.
• Review your credit reports from all three credit bureaus via AnnualCreditReport.com. Look for areas that need some work based on credit score factors.
• Pay off credit card balances to lower your credit utilization rate — the percentage of available credit you’re using at a given time — which is a major factor in your credit scores.
• Avoid new credit for six to 12 months before applying for a mortgage loan. This can give your score time to rebound from recent credit applications and avoid further complications that could impact your ability to get approved.
• Monitor your credit up until the day you close on the loan. “Your lender is going to pull a pre-close credit report in the days before your loan closes,” said Gordon. “If you’ve acquired new debt or gone late or in collections, it could delay your loan closing, or as a worst case, it can result in a loan denial.”

Good to know: While increasing your credit scores can help you save money, it could take several years to accomplish your goal, especially if you have negative items on your credit reports. In some cases, it can still make sense to apply for a loan with a lower credit score — it’s possible to buy a house with bad credit — particularly if you improve your credit and opt for mortgage refinancing in the future.

6 ways to get a better mortgage rate

1. Shop around: While submitting applications to multiple lenders can be time-consuming, actively browsing the market helps ensure you’re getting the best deal possible. To save some time, consider working with a mortgage broker who can shop around on your behalf.
2. Put more down: If you can afford it without depleting your cash reserves or sacrificing other financial goals, consider putting more money down on your loan. Try a budgeting app to sock away even more down payment savings.
3. Buy a less expensive home: The less you borrow, the better your odds of getting a lower rate. What’s more, choosing a more affordable home can put less pressure on your budget.
4. Choose a shorter term: If you can stomach a higher monthly payment, consider opting for a 15-year term instead of a 30-year term. Using a mortgage payment calculator can help you figure out the math.
5. Lower your DTI: Consider ways you can lower your DTI, such as paying off credit cards and loans with lower balances. Though it’s easier said than done, also investigate ways to increase your income, perhaps by taking on a side hustle, starting a business or asking for a raise at work.
6. Get a co-applicant: If you have a creditworthy family member or friend willing to cosign your application — or to be a co-borrower with equal access to the home and responsibility for repayment — it could improve your odds of getting a lower rate.

Frequently asked questions (FAQs)