Minor FICO score improvements can ease homebuying costs

"Across most states, it takes 18 to 36 months to raise an average FICO score to the 760 prime threshold, assuming an improvement of about 20 points per year. Mississippi and Louisiana require the longest timelines, with borrowers needing 4 years and 3.5 years of consistent progress, respectively. At the opposite end, Minnesota offers the fastest path, with an average timeline of just 0.9 years, due to a high statewide average score of 742."

"Nationwide, borrowers can save between $10,000 and $46,000 in mortgage interest by improving their credit to 760. States with higher median home values see the largest absolute-dollar savings. Hawaii has the largest potential savings nationwide, with the study finding that borrowers who improve to a 760+ score could save up to $46,206. Hawaii was followed by California and Massachusetts, with savings of $42,753 and $36,022, respectively."

"In California, for example, borrowers who raise their score to 760 could save roughly $42,753 over the life of a 30-year loan. In Texas, savings reach about $26,881, but borrowers face one of the highest proportional penalties for scores below 760, exceeding 10% of the total loan amount."

A study analyzing publicly available data and modeled scenarios estimates the timeline and financial benefits of improving credit scores to 760, the threshold for prime mortgage rates. Most states require 18-36 months to achieve this improvement at approximately 20 points annually. Mississippi and Louisiana have the longest timelines at 4 and 3.5 years respectively, while Minnesota offers the fastest path at 0.9 years. Financial benefits vary significantly by state, with Hawaii offering the largest savings at $46,206 over a 30-year loan, followed by California at $42,753. States with higher median home values see greater absolute-dollar savings. In high-cost states, the savings can exceed 40% of annual household income. Texas borrowers face penalties exceeding 10% of total loan amounts for scores below 760.

Read at www.housingwire.com