 TITLE: What Credit Score Do I Need to Buy a House? CONTENT: How Your Credit Score Affects Mortgage Rates\n--------------------------------------------\nYour credit score plays a role in determining the interest rate and payment terms on a mortgage loan. That's because lenders use what's called a risk-based pricing model to determine loan terms.\nThe more likely you are to pay your bills on time, based on your credit history, the lower your interest rate may be. With a less-than-stellar credit score, however, you may end up paying more.\nFor example, let's say you're hoping to get a mortgage loan for $250,000 over 30 years. If you have great credit and qualify for a 4% interest rate, your monthly payment would be $1,371 (excluding property taxes, homeowners insurance and private mortgage insurance), and you'd pay a total of $243,560 in interest over the life of the loan.\nBut if your credit needs some work and you qualify for a 5% interest rate instead, that increases your monthly payment to $1,446 and your total interest burden to $270,560—a difference of $27,000.\nMortgage lenders don't just look at your credit score when determining your rate, though. They'll also consider your debt-to-income ratio (DTI)—how much of your gross monthly income goes toward debt payments—as well as your down payment and available savings and investments.\nSo while it's important to work on your credit score before you apply for a mortgage, avoid neglecting these other important areas of your financial situation. END