The Cost of Buying a Home: Low Credit vs. Good Credit

Buying a home is one of the biggest financial decisions you’ll make—and your credit score plays a huge role in determining how much it will ultimately cost. A higher score can save you tens (or even hundreds) of thousands of dollars over the life of your loan, while a lower score can mean significantly higher monthly payments and long-term interest costs.

Let’s break it down with a real-world example.

Meet Alex and Jordan

Alex and Jordan are both looking to buy a $400,000 home with a 30-year fixed mortgage. They each have a 10% down payment of $40,000, meaning they’ll be borrowing $360,000.

However, their credit scores are very different:

Alex has excellent credit (760+)
Jordan has low credit (620)

Their credit scores impact the interest rates they qualify for, which, in turn, affects their monthly payments and the total interest they’ll pay over 30 years.

Loan Breakdown by Credit Score

Credit Score	Interest Rate	Loan Amount	Monthly Payment	Total Interest Over 30 Years
Alex (760+)	6.5%	$360,000	~$2,275	~$458,000
Jordan (620)	8.5%	$360,000	~$2,764	~$636,000

The Real Cost of Bad Credit

At first glance, the difference in monthly payments might not seem drastic, but over time, the costs add up fast.

Jordan pays $489 more per month compared to Alex.
Over the course of the 30-year loan, Jordan will pay nearly $178,000 more in interest than Alex.

That’s $178,000 that could have been used for home improvements, investments, savings, or even purchasing a second property.

How to Improve Your Credit Before Buying a Home

If your credit score isn’t where you’d like it to be, don’t worry—there are steps you can take to improve it before applying for a mortgage. Even a small increase in your score could save you thousands in the long run.

✅ Pay down existing debt – Lowering your credit utilization ratio boosts your score.
✅ Make payments on time – Your payment history is the biggest factor in your credit score.
✅ Avoid new credit inquiries – Each hard inquiry can slightly lower your score.
✅ Check your credit report – Look for errors and dispute any inaccuracies that may be dragging down your score.

The Bottom Line

Your credit score isn’t just a number—it’s a major factor in the cost of homeownership. A higher credit score means lower interest rates, smaller monthly payments, and massive long-term savings.

If you’re thinking about buying a home and want to explore your best financing options, Capstone Realty Professionals is here to help. Whether you need guidance on improving your credit or finding the best mortgage solution, we’ll work with you to make homeownership more affordable.

📞 Contact us today to start planning your path to homeownership!