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How Much Will a $300,000 Mortgage Cost You?

By Kevin Brouillard · September 27, 2022 · 6 minute read

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How Much Will a $300,000 Mortgage Cost You?

If you plan to take out a $300,000 mortgage, the costs of the loan can vary considerably based on your rate, term, property tax and insurance costs, and whether you need mortgage insurance.

Read on to learn how much a $300,000 mortgage could cost over the life of the loan.

What Are the Monthly Payments on a $300k Mortgage?

In April 2022, Redfin found that the monthly mortgage payment on the median asking price home had risen 39% from a year earlier, thanks to rising mortgage rates.

Ouch. But calculating the average monthly payment on $300,000 mortgages is not straightforward.

The lower the interest rate, the lower the monthly mortgage payment, holding other loan terms constant. The interest rate can be calculated differently for different types of mortgages. For instance, fixed-rate mortgages maintain a steady interest rate, whereas an adjustable-rate mortgage fluctuates over time based on market conditions.

The mortgage term also affects mortgage costs. The 30-year fixed-rate mortgage is by far the most popular choice, but a 15-year loan translates to a higher monthly cost for a $300,000 mortgage yet much less total interest paid.

Owning a home comes with annual property taxes based on the local tax rate and the home’s assessed value, which can change over time. Generally, this expense is divided across your monthly mortgage payments.

Your down payment also matters. Borrowers putting less than 20% down on a conventional mortgage usually need to pay for private mortgage insurance, often 0.5% to 1.5% of the original loan amount per year, until the mortgage balance reaches 80% (homeowner requests cancellation) or 78% of the home’s value, or the mortgage hits the halfway point of the loan term.

FHA loans require mortgage insurance premiums, which will last for the whole loan term if your down payment is less than 10%. MIP ranges from 0.45% to 1.05% of the loan balance, divided by 12 and added to your monthly payments.

Homeowners insurance is typically required by mortgage lenders regardless of the down payment amount.

How Much Income Is Needed to Qualify?

When taking out a home loan, lenders often ask for proof of consistent income, such as W-2s. But income is just one aspect of your personal finances a lender will evaluate to determine if you qualify for a mortgage on a $300,000 house.

Lenders use borrowers’ debt-to-income ratio to get a more holistic assessment of their ability to make monthly payments. DTI is calculated by dividing your monthly debt payments by your gross monthly income, then coming up with a percentage.

For example, if you gross $5,000 a month and have a $400 car payment and a $600 student loan bill, your DTI ratio is 20%.

A DTI ratio of 43% is usually the highest a borrower can have to obtain a qualified mortgage, according to the Consumer Financial Protection Bureau. However, lenders may prefer a lower DTI ratio — usually below 36% — for greater certainty that borrowers can afford their mortgage payments.

Programs like the FHA loan and Fannie Mae HomeReady® loan allow a DTI of up to 50% when compensating factors like a higher credit score exist.

Your credit history is another important factor to qualify for a mortgage on a $300k house, and will determine the rate you’ll pay.

How Much of a Down Payment Is Needed?

So how much do you have to put down for a $300k mortgage? The traditional ideal of a 20% down payment is not always necessary or doable. In fact, the latest median down payment is 13%.

How much you need for a down payment depends on the mortgage type, the lender, and if you’re planning to occupy or rent the property.

This is how much you’ll need to put down for different loan types.

•   Conventional loan: As little as 3% down for a primary residence. Buying a second home or investment property typically calls for at least 10% down and 25% down, respectively.

•   FHA loan: As little as 3.5% down if your credit score is 580 or higher. Borrowers with lower credit scores will need to put down at least 10%.

•   VA loan: Usually available with no down payment. This option is only available for active and veteran service members and some surviving spouses.

•   USDA loan: No down payment required. Eligibility is based on income and buying a home in a designated rural area.

But do down payment requirements change for different types of houses?

If you’re planning on buying a duplex or up to four units, you’d still qualify for residential financing, with the same parameters, if you plan to live in one of the units.

Recommended: A Guide to Buying a Single-Family Home

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.


What Are the Parts of a Mortgage Payment?

What you pay to your lender each month includes more than just what you owe on the loan. The mortgage payment consists of the principal, interest, and potentially, escrow costs.

Principal

The principal portion of the mortgage payment goes toward gradually paying the amount initially loaned to you.

When you start making mortgage payments, the amount paid toward the principal is somewhat low. Over time, greater proportions of each monthly payment will chip away at the principal balance.

Interest

The interest rate — how much you’re being charged to borrow the money — is determined by the type of loan, your personal finances, and market factors outside your control.

Borrowers with high credit scores are usually able to snag the best rates. Just a 1% increase in mortgage rate can add tens of thousands of dollars over the life of a 30-year loan.

The bulk of the mortgage payment goes toward interest at the beginning of an amortized loan.

You may be able to recoup some of the interest cost through the mortgage interest deduction.

Escrow

Most lenders require an escrow account to roll tax and insurance bills into monthly mortgage payments. This includes property taxes, homeowners insurance, and, if applicable, mortgage insurance.

How Much Interest Will Be Paid on a $300k Mortgage?

If you have a fixed-rate loan, the total interest can be easily calculated for the life of the loan. Borrowers with a 30-year fixed-rate mortgage at 5.6% APR would pay about $320,000 in interest on a $300,000 home loan.

Shortening the loan term to 15 years and getting a rate of 4.8% APR would reduce the total interest paid to $121,302.

With an adjustable-rate mortgage, the interest rate can change over time with market conditions.

Try out this mortgage payment calculator to see how much you might pay in interest with different rates and down payments. You can also toggle the amortization chart on a desktop.

How Much Is the Mortgage on a $300k House?

Using the previous example of a 30-year fixed-rate loan with a 5.6% annual percentage rate, the principal and interest would be $1,720 per month, and would total about $620,000 over the 30 years. To capture the full mortgage cost, you also need to estimate the tax and insurance costs.

•   PMI (if applicable): often 0.5% to 1.5% of the original loan amount but up to 2.25%. Assuming a 1% rate, monthly PMI would be $250, with $21,303 the total amount of PMI you’d pay until you reach 20% equity.

•   Homeowners insurance: $2,305 on average annually, or $192 per month.

•   Property taxes: 0.28% to 2.49% of assessed value on average, depending on U.S. state. Most states have a homestead exemption that gives homeowners a tax break.

Recommended: A Guide to Mortgage Relief Programs

How to Get a $300k Mortgage

Prospective homebuyers can take steps to help qualify for a $300k mortgage and obtain more favorable terms.

•   Budget: First, it’s important to estimate how much you can afford.

•   Check your credit: Assess your credit history and take care of any late payments to improve your FICO® scores.

•   Get pre-approved: Starting the mortgage pre-approval process with one or more lenders gives you tentative approval for a loan amount and type, making you a more competitive buyer.

   Consider the interest rate, fees, and closing costs among lenders when shopping for a mortgage.

•   Make an offer: When you find a home that meets your needs and budget, consult with a real estate agent to submit an offer with your pre-approval letter.

•   Apply for the mortgage and get loan estimates: Now that you have a property address, you might want to request loan estimates from a number of lenders. A loan estimate is a three-page standard form that details the loan after you apply for a mortgage. Applying with more than one lender within 14 to 45 days counts as a single credit inquiry.

•   Choose a lender, and wait for the lender to verify your finances and appraise the property to underwrite the loan.

•   Close the deal: Get your cash to close and homeowners insurance ready and finalize the paperwork to close on your $300,000 mortgage.

Recommended: SoFi’s 2022 Home Loan Help Center

Where to Get a $300k Mortgage

The Consumer Financial Protection Bureau and others recommend getting quotes from multiple lenders. Buyers can choose from banks, credit unions, online lenders, and mortgage brokers to finance a home purchase.

While we’ve identified the interest rate and loan term as key information to compare, keep an eye out for fees paid directly to the lender, like origination fees and mortgage points.

The Takeaway

How much will a $300,000 mortgage cost you? The interest rate, loan term, insurance costs, and taxes will determine the amount you pay each month and over the life of the loan.

As you begin comparing lenders, give SoFi a look. SoFi fixed rate mortgage loans require as little as 3% down for qualifying first-time homebuyers.

Check your rate in just minutes

FAQ

How much is a $300,000 mortgage per month?

The monthly payment on a $300,000 mortgage depends on the loan length, interest rate, whether mortgage insurance is required, and more.

How much do I need to earn to get a mortgage of $300,000?

The required annual income to get a $300,000 mortgage is affected by your other debts and the down payment amount.

Can I get a $300,000 mortgage with a bad credit history?

You might be able to obtain a $300,000 mortgage with subpar credit, but the terms may be less competitive. For instance, borrowers with credit scores from 500 to 579 could be eligible for FHA loans, but they’ll have to make a down payment of at least 10% instead of 3.5%.


Photo credit: iStock/Vertigo3d

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