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You’ve found it: your dream home. And it’s dreamy enough that you’ve put in an offer. But then the appraiser comes back with their report — and the figure is substantially lower than the agreed-upon sales price. This difference is what’s known as an appraisal gap.

An appraisal gap can certainly be a major inconvenience in the home-buying process — but fortunately, there are options, including renegotiating with the seller or walking away from the sale entirely. Below, we’ll outline everything you need to know about appraisal gaps, including ways to deal with them.

Why Would an Appraisal Gap Occur?

An appraisal gap happens when the appraised value of the home you intend to buy is lower than the agreed-upon purchase price.

It’s possible that you’re in a hot real estate market, and buyers competing for homes are engaging in bidding wars that push up home prices beyond their material value. Even if you weren’t engaged in a bidding war yourself, the seller’s price might reflect a rapid rise in local market prices.

Or maybe the seller simply overestimated when setting their asking price. While a seller’s market increases the chances of an appraisal gap, sometimes it just happens, no matter what’s going on in the real estate market in your area. The property valuation the seller used to price the house may simply be different from the appraiser’s estimate.

Impact of Appraisal Gaps

Spending more on a home than it’s worth has a variety of consequences, both on the buyer’s finances and on the home-buying process itself. Here’s a closer look.

Effects on Home Purchase

If you’re like most Americans — and especially first-time homebuyers — chances are you’re planning to use a mortgage loan to purchase your home. But lenders don’t typically approve mortgages for more than the home’s fair market value. (In fact, it was probably your lender that required the home appraisal that showed the appraisal gap in the first place, for precisely this reason.)

Obviously, this means an appraisal gap could cause trouble when you’re trying to qualify for a mortgage. It can lower the amount the bank is willing to lend and increase the amount of cash you need on hand to successfully make the purchase.

Even if you could successfully take out a loan for more than the home’s appraised value, you’d be starting your purchase with negative equity, which would substantially lengthen the time frame it would take to build wealth in your home. You can offset this by making extra mortgage payments (a process called mortgage curtailment) if you have the cash on hand to do so.

Recommended: First-Time Homebuyer Guide

Financial Implications

Along with hitches in the home-buying process, an appraisal gap could have substantial financial implications. For example, you may need to dig up additional cash in order to cover the gap — or crack your knuckles and head back to the table to renegotiate with the seller.

In some circumstances, an appraisal gap might even cause you to walk away from the deal entirely, potentially leaving your earnest money (typically 1%-3% of the purchase price) on the table. The specifics depend on the wording in your purchase contract, which we’ll come back to in just a minute.

What to Do if an Appraisal Gap Occurs

If you’re facing an appraisal gap, there are a few different ways to resolve it.

Renegotiate With the Seller

So long as you’re not contractually bound to cover an appraisal gap by an appraisal gap coverage clause, you may be able to renegotiate a new purchase price with the seller — one that lines up better with the home’s appraised value.

Cover the Gap Yourself

Perhaps the most straightforward way to resolve an appraisal gap is to simply pony up. Of course, this “simple” fix isn’t necessarily possible for every buyer, given that appraisal gaps can be on the order of tens of thousands of dollars — on top of all the other expenses that come up at the closing table. If you take this route, start by asking the seller to meet you in the middle, with each of you covering half the amount.

Dispute the Appraisal

It may be a hassle — and it may not result in any changes — but you could also ask your lender for a review of the appraisal to ensure the value was correctly calculated. You can make an ROV request with your lender. An ROV lets you explain more about why you think the home is worth more than the original appraisal states, including any additional or updated information.

You might even get a new appraisal done if your lender will allow it, but it would likely be an additional expense out of your pocket. If you had an appraisal waiver the first time (in which an automated tool is used to estimate the home’s value) you might request an in-person appraisal. But be warned that a second appraisal could return a home value that’s higher or lower than your first appraisal.

Cancel the Contract

Finally, of course, if the appraisal gap is simply too much to bear, you can always walk away. Be forewarned, however: If you cancel without an appraisal gap contingency in your contract, you may lose the earnest money you’ve put on the table.

Recommended: Mortgage Refinancing

Preventing Appraisal Gaps

Which options are available to you will depend, again, on your purchase contract, which may have an appraisal gap contingency or appraisal gap coverage clause.

•   An appraisal gap contingency is a section of the purchase agreement that gives you, the buyer, the right to walk away from the deal if an appraisal gap occurs without losing the earnest money.

•   An appraisal gap coverage clause, on the other hand, states that you’re responsible for covering the appraisal gap. But it can also be used to cap how much of a gap you’re willing to cover as the buyer. For instance, it may say that you agree to cover an appraisal gap of up to $20,000 — but if the difference climbs beyond that, you have the right to walk away without any financial penalty.

An appraisal gap coverage clause can be a useful tool in a seller’s market, especially when you’re bidding against other would-be purchasers. It can help ensure you don’t spend more than you can afford. On the other hand, if you’re unwilling to foot the bill of any appraisal gap whatsoever, even if it makes you a slightly less competitive buyer, consider adding an appraisal gap contingency to your contract.

The Takeaway

An appraisal gap — the difference between the appraised value of the home you’d like to buy and the agreed-upon purchase price — can be a fly in the home-buying ointment. But not everything is lost, particularly if you have your purchase contract written in a way that circumvents the problem in the first place. If necessary, prepare to negotiate and possibly spend more out of pocket to complete your home purchase.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

Who is responsible for covering an appraisal gap?

It depends. If there’s an appraisal gap coverage clause in the purchase contract, the buyer is likely responsible for covering the appraisal gap — though only up to specified limits. (Appraisal gap coverage clauses are common in competitive markets, where sellers have more leverage.) However, if your contract includes an appraisal gap contingency, you may be able to take the seller back to the table and renegotiate a lower purchase price — or walk away from the sale entirely.

Can a low appraisal be challenged or appealed?

Yes. If you think the home has been valued at a lower price than is accurate, you can put in what’s called a reconsideration of value (ROV) request with your lender. An ROV gives you the opportunity to explain more about why you think the home is worth more than the original appraisal states, including any additional or updated information. However, it’s no guarantee that the appraisal gap will close all the way — or at all.

How common are appraisal gaps in the home-buying process?

Appraisal gaps don’t happen in the majority of sales, but they’re not uncommon either. They’re somewhat more likely to happen in hot real estate markets when multiple bids from prospective buyers could push the purchase price up beyond the home’s fair market value.

Photo credit: iStock/andresr

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SOHL-Q126-260

As painful as it can be to see interest rates top 6.00% when they hovered over 2.00% in late 2020, waiting for them to come down again could bite would-be homeowners. Although today’s rates mean homebuyers can expect to spend more on interest over their loan’s lifetime, they’re actually close to the 50-year average — and besides, if they plummet again, the market will once again be flooded by buyers who have been sitting on the sidelines.

Still, interest rates are a big deal when it comes to how much home you can comfortably afford — as well as the ongoing health of your personal finances. In an April 2024 survey of 500 would-be homebuyers, SoFi found that 45% were concerned about mortgage costs, making it one of the top concerns of prospective homeowners. One in 10 people surveyed said difficulty securing a mortgage was the biggest home-buying challenge they were facing. In this article, we’ll walk through a little bit of mortgage rate history and context, as well as offering ways to decide whether you’re ready to buy or not, regardless of the market.

Why Are Mortgage Rates So High?

Since Americans witnessed a historic mortgage interest rate drop in 2020, today’s 6.00% and 7.00% rates seem astronomical. (And, to be fair, coupled with a median national home sales price over $400,000, they can pack a powerful punch: After interest, a 30-year mortgage could easily cost twice the amount of the loan.)

Still, it’s important to remember that when you look at the big picture, today’s rates are actually not that big a deal. Yes, they’re the highest they’ve been since the year 2000, but they’re about on par with (or slightly under) the rates buyers saw in the 1990s — and less than half of the 17.00% and 18.00% interest rates buyers paid in the early 1980s.

The rise and fall of mortgage rates is tied to complicated economic factors, including inflation, the Federal interest rate, and the yield of 10-year Treasury bonds. It’s not totally predictable, but one thing’s for sure: It will continue to undulate over time. What’s more, attempting to time the market to purchase a house might not be the best financial move, even if it does save you money on interest.

💡 Quick Tip: SoFi’s Lock and Look + feature allows you to lock in a low mortgage financing rate for 90 days while you search for the perfect place to call home.

How Low Will Mortgage Rates Drop This Year?

While no one can fully predict the future, experts do weigh in with their predictions for the mortgage interest rate. Projections suggest mortgage interest rates will stay around 6.00% in the next year, so we’re likely to stay far from the 2.00% and 3.00% free-for-all we saw a few years ago.

How Your Interest Rate Impacts Your Buying Power

So how much do interest rates really impact how much house you can afford? Glad you asked!

Say you’re going to buy a $400,000 home — which is just a little less than the U.S. median sale price right now. You’ve saved up a 20% down payment, or $80,000, and plan on taking out a 30-year mortgage.

With a fixed interest rate of 7.00%, your monthly payment would be about $2,128 per month, before additional costs such as homeowners insurance and property taxes. At 6.50%, that payment goes down to $2,022, and at 6.00%, it drops to $1,918. (So a percentage-point drop equates to $210 per month in savings or $2,520 per year.)

However, it’s over the long term that interest really has the opportunity to add up. In the exact same scenario, over the 30-year lifetime of the loan, you’d pay approximately the following amount in total interest:

•   7.00%: $446,426

•   6.50%: $408,140

•   6.00%: $370,683

As you can see, just a single percent difference can save you nearly $100,000 in the long run. So while it’s not possible to perfectly time the market, it is worth shopping around for the lowest possible interest rates you can qualify for.

(Keep in mind, too, that you can always pull your own customized numbers using a mortgage calculator.)

💡 Quick Tip: Don’t have a lot of cash on hand for a down payment? The minimum down payment for an FHA mortgage loan is as low as 3.5%.

Should You Wait to Buy a Home?

The question of whether you’re ready to buy a home — or if it makes more sense to wait — is one that depends on far more than the going market interest rate. Here are some ways for first-time homebuyers to decide what might be the right move, right now.

Reasons to Buy

These are good reasons to consider going ahead with the homebuying process, high interest rates or not:

•   You’re financially (and emotionally) ready. Your credit score is in tip-top shape, you’ve saved up a down payment, and you’re planning to stay in your new home for several years, which means you could feasibly refinance once interest rates drop substantially and still break even on closing costs. (A home affordability calculator can help you figure out just how much house you can reasonably afford.)

•   The market looks good to you. These higher interest rates mean the housing market is moving far more slowly than it used to, so the amount of available inventory may give buyers more time to shop around and find something they really like. This dynamic can also drive home prices down, creating more value for you as the property appreciates over time.

•   It’s time to move. Regardless of the housing market, life goes on — and if you’re expanding your family or relocating, you may not have a choice about moving. If the opportunity is presenting itself and you’re financially ready, this could be a great time to get started on building equity and generational wealth as a homeowner.

Reasons to Wait

On the other end of the spectrum, there are some good reasons to wait on buying a home, even when interest rates are low:

•   You’re not financially (or emotionally) ready. If a monthly mortgage payment would leave you cash-poor, you don’t have a substantial emergency fund saved up, your job security is in question, or you’re not quite sure you’re ready to commit to a given locale, buying a home might not be the right move for you — yet.

•   You can’t get prequalified by a mortgage lender. Perhaps you’re in a decent amount of debt or have an iffy credit history. If you can’t qualify for a loan right now, take the time to work on those factors and get ready for the future.

•   The market looks meh to you. If you can’t find a home you like, you probably shouldn’t buy one. After all, it’s a major investment — and while we’re not suggesting you have to wait for an absolutely perfect house to come along, you should be happy with your purchase!

Should Interest Rates Influence Your Decision?

While interest rates are of course a relevant factor for would-be homeowners, so long as you’re financially prepared and planning on staying in your new home for at least a few years, higher interest rates shouldn’t deter you. After all, you can always refinance once rates drop.

The Takeaway

Waiting for interest rates to drop can be a bit like waiting for Godot: You might get stuck in the in-between. If your finances are in shape and you’ve found your dream home, now could still be the right time to take the leap and become a homeowner.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

Is it better to wait for interest rates to go down?

Not necessarily. While lower interest rates can subtly lower a monthly mortgage payment — and save buyers potentially hundreds of thousands of dollars over the lifetime of a loan — it’s not the only factor to consider if you’re otherwise ready to buy a home. Plus, qualified buyers can always refinance their purchase down the line when rates drop again.

Will 2026 be a good year to buy a house?

It’s probably as good a year to buy as any. Many experts expect interest rates to hover around 6% for the rest of 2026 and into 2027, and it’s unlikely that they will plummet back down to 2.00% or 3.00% as they did a few years ago.

What month is the best time to buy a house?

November and December tend to be favorable times for buyers looking for the best deal possible. This is because the holidays and winter weather may keep some buyers from shopping during this time, which means sellers might be more motivated to make a deal. You won’t get to see your new home in the height of its summer beauty for months, but you’ll get to find out whether it’s well insulated!

Photo credit: iStock/Andrii Yalanskyi

SOHL-Q126-229

Living small can have big advantages — particularly when it comes to cost. With fewer square feet to build, maintain, and keep lit, cooled, and heated, a tiny house can be far cheaper than more traditional iterations of the American dream.

Still, not all tiny houses come with tiny price tags. While it’s possible to build an off-the-grid tiny house for $10,000, some luxury tiny homes cost $100,000 or more. On average, a tiny home costs just over $45,000 to build, not including the price of the land it’s sitting on, though purchasing a prebuilt tiny home could rack up a higher price tag.

What Is the Average Tiny House Cost?

While, as we’ve seen, the cost of a tiny house can range significantly, the average price is usually somewhere between $30,000 and $60,000, according to Porch.com. Compare that to the latest median sale price for a non-tiny home — $434,000, according to real estate giant Redfin. (That’s before accounting for peripheral expenses such as closing costs.) Bear in mind, though, that tiny house prices generally don’t include the land where the house will be located or the cost of any water, sewer, or electrical service hookup.

That’s a pretty hefty difference, although of course the tight housing market has an effect on the cost of prebuilt tiny homes, too. It’s not uncommon to see tiny homes listed for close to (or even over) $100,000, especially in highly desirable areas.

Many tiny houses are so relatively low cost that they don’t meet the minimum threshold to qualify for a home loan, although there are different types of mortgage loans, and you can shop around to find a lender that might finance your home.

Tiny House on Wheels vs Foundation

As you may already know, tiny homes can be built on wheels (though they’re not usually as mobile as standard mobile homes) or built on a foundation just like a larger home. Along with giving their owners some flexibility when it comes to location, building a tiny house on wheels can also change the price tag.

According to data from HomeAdvisor, a tiny house on wheels costs an average of $60,000 to $80,000, while those built into foundations start lower — at $51,000 — but can run substantially higher, to $180,000.

Many other factors also play into the overall tiny home cost, too, which we’ll take a closer look at next.

Recommended: How to Get a Mortgage

Factors Affecting Tiny Home Cost

What other factors affect your tiny home’s bottom line? Here are some of the most impactful.

Size and Square Footage

While “tiny” is a fairly open-ended description, according to builder United Tiny Homes, these structures are generally between 100 and 400 square feet. There is some wiggle room on either end, though, and 500-square-foot tiny houses aren’t unheard of.

As you might expect, the larger your tiny house is, the more materials it takes to build — and therefore, the higher its price is likely to be. Still, since even the largest tiny homes are so much less expensive than traditional homes, it may be worth it to have just a little bit more room to roam.

Building Materials

Another factor that’s true for tiny homes as well as their larger counterparts: The higher the quality of the building materials, the more expensive the tiny home is likely to be. (However, it may also be able to withstand the test of time better, lowering overall maintenance costs and actually saving you money over time.)

However, some tiny home builders save by using recycled or reclaimed materials, which can substantially lower the overall cost (though make the project more time- and effort-intensive).

Labor and Professional Services

Labor is, of course, another major factor. If you’ve got the skills to build your tiny home yourself — or the patience to learn them — you stand to save thousands of dollars on what you’d spend to have a professional builder do it for you. How much does it cost to build a tiny house when it comes to labor? Construction work usually starts around $23 per hour, depending on the specific project, and that’s not counting the cost of materials and any overhead a contractor would charge. Professionals such as a plumber or electrician can run into the hundreds of dollars per hour.

Of course, when it comes to tricky and even potentially dangerous aspects of building a tiny home, like running electricity, professional know-how might be worth the price if you’re an amateur.

Building vs Buying a Tiny House

When you’re budgeting for buying a house, bear in mind that buying a premade tiny home could be a lot more expensive than building one yourself — but as we’ve seen, you can also rack up a large overall bill on building your own if you rely on professional labor to do so. Here are some other considerations to keep in mind as you decide which route is right for you.

Custom Build

Having the opportunity to literally dream up your perfect tiny home and bring it to life might be priceless to you — and, again, if you’re able to DIY the project from start to finish, it might cost you less than buying someone else’s already-built dream. However, working with a contractor and architect to draw the blueprint and build the entire home from scratch could be a lot pricier. The good news is, tiny homes are popular enough now that services specifically designed to build tiny homes are more readily available.

Prefab or Kit Homes

Looking for a good middle road between a custom-designed, DIY tiny home and buying one that’s ready to go? Tiny home kits are available for prices starting around $4,000 or so — although this figure of course doesn’t include the land the tiny home will need to sit on or the labor it’ll take to get it from flat to 3D.

Used Tiny Homes

Buying someone else’s used tiny home is an option that could save you money — or cost you more, if the house has been carefully flipped and staged and is well marketed. Used tiny homes on wheels may be less expensive than those on foundations, but lots of factors play in, including geographical location, materials used, and more.

Recommended: Mortgage Calculator

Cost-Saving Tips for Tiny House Living

Here are some best practices for minimizing tiny house cost:

DIY Construction

Once again, if you have (or can summon) the know-how to build your own tiny house from scratch, you can shave a substantial portion off the final price tag. Plus, you’ll be better prepared for inevitable maintenance projects down the line — which means the saving opportunities just keep going.

Repurposed and Recycled Materials

Using repurposed and recycled materials can lower the cost of the physical parts of your building. In some cases, recycled and repurposed materials are available for free — though you may “pay” in the time it takes to find them.

Off-Grid Living

Finally, setting your tiny house up for off-grid living saves you money on utilities and city services, such as trash and water. By utilizing solar panels and a composting toilet, you can make your tiny house ready for the great outdoors — and self-sustaining enough to forego the regular monthly bills.

The Takeaway

While the cost of a tiny home can vary significantly, it’s almost always substantially lower than the cost of traditional, larger American houses — which can give those who live tiny big gains in terms of financial freedom.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

What is the cheapest way to build a tiny house?

If you have the know-how, building your own tiny house from scratch with recycled and repurposed materials can save you thousands of dollars. Many knowledgeable tiny home owners have completed the project for under $10,000.

How much does it cost to hire a tiny house builder?

While labor costs vary substantially depending on where you live (and other factors), the cost of materials for most tiny homes is already around $50,000, and labor usually costs about $23 per hour. Which is to say, the overall cost to hire a tiny house builder can quickly approach $100,000, particularly if you want a custom design.

Can you get a loan for a tiny house?

Tiny homes are still a relatively new phenomenon, and some mortgage lenders’ policies have not yet been updated to work for them. Given their relatively low cost, the amount you need to borrow may be under the mortgage lender’s minimum. Personal loans are another option for those who want to finance a tiny house, but beware: Unsecured personal loans usually come at higher interest rates than secured mortgages, and the interest may not be deductible on federal taxes as it would with a traditional mortgage.

Photo credit: iStock/RossHelen

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SOHL-Q126-246

If you earn a minimum of $180,000 a year, you may be able to afford a $600,000 mortgage, as long as you don’t have any other significant debts. But the exact amount you may qualify to borrow — even if you’re in that income range or higher — may also depend on several other variables, including your credit score and down payment.

Read on for a look at how much income may be needed for a $600,000 mortgage, how income fits into the overall mortgage equation, and how lenders typically determine the mortgage amount a homebuyer can handle.

What Income Is Needed to Get a $600,000 Mortgage?

You might think the loan amount you’ll receive when you apply for a mortgage will be based mostly on your household income. But income is just one of several factors lenders generally consider when determining how much someone can borrow.

The home mortgage loan a borrower can qualify for is usually based on how much the lender believes that person can reliably pay back. The loan company will run your finances through a few different checks and calculations to come up with that number. Here are a few things lenders may look at when you apply.

Reliability of Income

Be prepared to be asked not only about your income but also how long you’ve had your job (or your business if you’re self-employed). When it comes to your income, if you want to get an idea of where you stand before you apply for a mortgage, an online home affordability calculator can help you estimate whether your income is high enough to afford a $600,000 loan. Or you might try prequalifying with one or more lenders.

Creditworthiness

Lenders will also check your credit score and credit reports to ensure that you’re financially responsible and pay your bills on time.

Down Payment Amount

Contrary to what many people believe, a 20% down payment isn’t necessary to get a home loan. First-time homebuyers may be able to put as little as 3% down with some lenders, or even less, depending on the type of mortgage they get. A larger down payment can help you lower your monthly payments. It can also show lenders you’re serious about your investment.

Debt-to-Income (DTI) Ratio

You can also expect lenders to compare your monthly gross income to your existing monthly debts (such as credit cards and student loans) to help assess if you’ll be able to manage all your payments. This calculation is called your DTI ratio, which is your monthly debts divided by your gross monthly income.

What Is a Good Debt-to-Income Ratio?

Most lenders prefer a DTI ratio of 36% or less. But some lenders may accept a DTI ratio of up to 43% or even higher if the borrower can meet other criteria on certain types of loans.

What Other Factors Are Mortgage Lenders Looking For?

Here are a few formulas that you and your lender may use to determine how much house you can afford on your income.

The 28/36 Rule

The 28/36 rule combines two factors that lenders typically look at to determine home affordability: income and debt. The first number sets a limit of 28% of gross income as a homebuyer’s maximum total mortgage payment, including principal, interest, taxes, and insurance. The second number limits the mortgage payment plus any other debts to no more than 36% of gross income.

For example: If your gross annual income is $180,000, that’s $15,000 per month. So with the 28/36 rule, you could aim for a monthly mortgage payment of about $4,200 — as long as your total monthly debt (your mortgage payment plus car payment, credit cards, etc.) isn’t more than 36% or $5,400. With disciplined budgeting, you may be able to afford a $600,000 mortgage at this income level.

The 35/45 Model

Another calculation lenders might look at is the 35/45 method, which recommends spending no more than 35% of your gross income and no more than 45% of your after-tax income on your mortgage and debt.

For example: Let’s say your gross monthly income is $20,000, and your after-tax income is about $15,000. In this scenario, you might spend between $6,750 and $7,000 per month on your debt payments and mortgage combined. This calculation allows you to spend a bit more on your mortgage payment, as long as you aren’t carrying a heavy debt load.

The 25% After-Tax Rule

If you’re nervous about keeping up with your monthly mortgage payments, this formula will give you a more conservative amount to aim for. With this calculation, your target is to spend no more than 25% of your after-tax income on your mortgage.

Keep in mind that these calculations can give you only a rough estimate of how much you can borrow. If you want to be more certain about the overall price tag and monthly payments you can afford, it may be helpful to go through the mortgage preapproval process.

What Determines How Much House You Can Afford?

Here’s something else to consider when determining how much income is needed for a $600,000 mortgage: A house payment isn’t limited to just principal and interest, and the extra expenses that may be tacked on every month can add up fast. Let’s examine the costs covered by a monthly loan payment.

Principal

Principal is the original amount borrowed to buy the home. Each month, a portion of your payment will go toward paying down this amount.

Interest

Interest is the money you pay to the lender each month for giving you the loan. Personal factors (such as the loan length you choose, your credit score, and your income), as well as prevailing rates in the market, can impact the interest rate you pay.

Homeowners Insurance

The cost of homeowners insurance (coverage that protects your home and other assets from various risks) may be rolled into your monthly mortgage payment. Your lender will then pay this premium when it’s due.

Mortgage Insurance

Depending on the type of loan you get and the amount you put down on your home, you may be required to carry private mortgage insurance (PMI) or some other type of mortgage insurance policy. This insurance is designed to protect the mortgage lender if a borrower can’t make the agreed-upon loan payments.

Property Taxes

A portion of your monthly mortgage payment may also go toward the property taxes in your town or city.

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Recommended: Home Loan Help Center

$600,000 Mortgage Breakdown Examples

The monthly payment on a $600,000 mortgage can vary based on several factors, including the length of the loan (usually 15, 20, or 30 years) and the interest rate. A mortgage calculator can give you a pretty good idea of what your payments might be.

Here are some examples of how the monthly payments for a $600,000 mortgage might break down. The Other Costs bucket assumes PMI of .5%, property tax of 1%, and annual homeowners insurance of $2,000.

30-Year Loan at 6.00% Fixed Interest Rate

Total Payment: $4,507

Principal and Interest: $3,597

Other Costs (estimated PMI, homeowners insurance, and property taxes): $1,000

15-Year Loan at 6.00% Fixed Interest Rate

Total Payment: $6,063

Principal and Interest: $5,063

Other Costs (estimated PMI, homeowners insurance, and property taxes): $1,000

30-Year Loan at 7.00% Fixed Interest Rate

Total Payment: $4,992

Principal and Interest: $3,992

Other Costs (estimated PMI, homeowners insurance, and property taxes): $1,000

15-Year Loan at 7.00% Fixed Interest Rate

Total Payment: $6,393

Principal and Interest: $5,393

Other Costs (estimated PMI, homeowners insurance, and property taxes): $1,000

Pros and Cons of a $600,000 Mortgage

According to Redfin, the median home sale price in the U.S. in February 2026 was $429,226. So if you can qualify for a mortgage that’s around $600,000, there’s a good chance you’ll be able to find a pretty nice home — depending on where you live.

The downside of borrowing $600,000 is that your mortgage payments could take a sizable slice out of your income every month. If you’re cutting it close and you experience an unexpected expense or temporary job loss, you may have trouble staying on track. Before moving forward with a loan of this size, you may want to speak with a financial advisor and be sure the amount fits with your budget and your other goals.

Recommended: Best Affordable Places to Live in the U.S.

How Much Will You Need for a Down Payment?

A down payment is generally between 3% and 20% of the purchase price. The amount you’ll need for a down payment will depend on the cost of the home you plan to buy and the type of mortgage loan you get.

Can You Buy a $600,000 Home With No Money Down?

You may be able to get a mortgage without making a down payment if you can qualify for a government-backed loan from the U.S. Department of Agriculture (USDA) or a VA home loan from the U.S. Department of Veterans Affairs. These loans are insured by the federal government, which means the government will help pay back the lender if the borrower defaults on the loan.

Not all lenders offer these programs, and borrowers must meet specific requirements to qualify. But if you think you may be eligible, it could be an option that’s worth looking into.

Can You Buy a $600,000 Home With a Small Down Payment?

Some private lenders will accept as little as 3% down from a first-time homebuyer on a conventional mortgage, so don’t give up if you can’t get a no-down-payment loan.

You also may want to check out the requirements for a government-backed Federal Housing Administration (FHA) loan, which allows buyers to make a down payment as low as 3.5%. There may be a limit on how much you can borrow with an FHA loan, depending on where you buy, but the 2026 limit in higher-cost areas can be as much as $1,249,125. In Alaska, Hawaii, Guam, and the U.S. Virgin Islands, the limit is $1,873,687.

Is a $600,000 Mortgage With No Down Payment a Good Idea?

There’s no question that coming up with a down payment can be an obstacle to homeownership, especially for first-time homebuyers. And the thought of skipping that step may be appealing if it could help you get into a home faster or allow you to hold onto your savings for renovations, an emergency fund, or other financial goals.

It’s important to remember, though, that it can take longer to build equity in your home without a down payment. And though you won’t have to pay for mortgage insurance with a no-down-payment government-backed loan, you can expect to pay an upfront funding fee for a VA loan and an upfront and annual guarantee fee for a USDA mortgage. A mortgage professional can help you weigh the pros and cons of different types of mortgage loans and determine the best move for your individual circumstances.

What If You Can’t Afford a $600,000 Mortgage Even With No Down Payment?

Here are a few steps to consider if it turns out you can’t afford the payments on a $600,000 mortgage.

Pay Off Debt

If your DTI ratio needs work, you may want to suspend your home search and concentrate on paying down recurring debts such as credit cards, car payments, or a personal loan. This could allow you to put more of your monthly income toward your mortgage payments.

Build Your Credit

Checking your credit reports can give you an idea of what lenders might see when they evaluate your creditworthiness. If there are any errors, you can take steps to fix them, and if you see something negative in your reports, you can work on doing better. If you use a credit-score monitoring service, you may already know what your credit score is and if it needs a boost. Conventional lenders typically look for a minimum score of 620.

Start Budgeting

Creating a budget and trimming some expenses could help you reach your debt-payment and savings goals. Remember: If you can come up with a bigger down payment, you may be able to borrow less, keep your monthly payments to a more reasonable amount, and pay less in interest over the life of the loan.

Alternatives to Conventional Mortgage Loans

If you can’t qualify for a conventional mortgage loan, you may have some alternatives to consider. Here are a few potential options.

First-time Homebuyer Programs

As mentioned above, you may qualify for a federal, state, or local first-time homebuyer program that can help lower your down payment, closing costs, and other expenses. There may be limits on the type of home you can buy or a cap on the home’s cost. But you might find it’s worth doing some research or speaking with a mortgage professional to see if you’re eligible.

Rent-to-Own

Another option may be to enter into an agreement to rent-to-own a home. With this type of arrangement, you start out renting, but the landlord agrees to credit a portion of your monthly payment toward purchasing the home. This can be a good way to start working toward homeownership if you can’t qualify for the mortgage amount that you want. But it’s important to understand the downsides of the deal, including the possibility of losing money if you change your mind about buying the home or if the current owner has second thoughts about selling it.

Owner Financing

With owner financing, the person selling the home may serve as the lender for all or part of the purchase price. Just as with a rent-to-own home, there are risks to this kind of agreement, but it can make homeownership possible if a traditional loan isn’t available.

Mortgage Tips

No matter how much you plan to borrow, buying a home is a big step. Here are a few things you may want to do to prepare.

Work Out Your Housing Budget

Remember, your housing costs won’t be limited to principal and interest. It’s important to determine how much you might pay for insurance, taxes, homeowners association dues, maintenance, and other expenses before you make the leap to homeownership.

Find the Mortgage That Best Suits Your Needs

This may include deciding whether you want a:

•  Fixed vs. variable interest rate

•  Conventional vs. government-backed loan

•  Shorter vs. longer term loan

Get Preapproved

Going through the mortgage preapproval process with a lender can give you a better idea of how much you can afford to spend on a home. And having preapproval may give you an edge over other house hunters in a tight market.

The Takeaway

Obtaining a mortgage is one of many steps in the homebuying process, but it’s an important one. Taking the time to do some research could keep you from getting in over your head or locked into a loan that isn’t a good fit.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

How much income do you need to qualify for a $600,000 mortgage?

If you make at least $180,000 a year, you may be able to qualify for a $600,000 mortgage. Your eligibility depends on how much debt you’re carrying and other variables.

How much is a $600,000 mortgage per month?

The monthly payment for a $600,000 mortgage can vary based on several factors, including the length of the loan and the interest rate. For example, a 30-year fixed-rate mortgage with a 7.00% interest rate could be $3,992 per month for principal and interest alone, while the principal and interest for a 15-year fixed-rate mortgage with a 7.00% interest rate could be $5,393 per month.

Can I afford a $600,000 house on a $100,000 salary?

It would be very difficult to keep up with the monthly payments or even qualify for a loan to buy a $600,000 house on a $100,000 salary. That is, unless you have additional income outside of your salary or make a very large down payment on the property.

Photo credit: iStock/LumiNola

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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The average square footage of new single-family homes in the U.S. is currently 2,405 square feet. That figure varies significantly from state to state, however, with averages ranging from 1,164 square feet (Hawaii) all the way up to 2,800 square feet (Utah).

Homes tend to be larger in areas where prices are lower and smaller in more expensive locales, though other factors also come into play. Understanding the average square footage of houses in your area can help you set realistic expectations for your house hunt and determine how much house you can afford.

Home Square Footage Trends in the US

The size of homes in the U.S. has increased significantly over the past several decades. In 1949, the average size of a house for one family was 909 square feet. By 2021, it had almost tripled to 2,480 square feet, according to American Home Shield’s American Home Size Index.

One of the reasons behind expanding home sizes was migration from cities to the suburbs following World War II. During these years, new highways were built, demand for housing grew, and homeownership rose. People moved into bigger houses with more land outside the densely packed cities.

Overcrowding decreased at the same time. In 1950, 15.7% of U.S. homes were considered overcrowded. By 2000, the proportion had dropped to 5.7%. Today, older homes tend to have smaller floor plans, while more recent constructions are more spacious.

That said, home sizes have been generally decreasing since 2015 due to rising interest rates and home prices, which make affording a house more difficult. Home size increased during the Covid-19 pandemic in 2021 when interest rates reached historic lows, and homebuyers were often looking for a house that could serve as a home, a workplace, and a school at the same time. Home sizes trended downward in 2022 and 2023 as interest rates rose again and housing became less affordable. Learn more about how to save money for a house.

Still, the mean square footage for new single-family homes was 2,405 square feet in the third quarter of 2025, a huge increase from the 909-square-foot average of 1949.

States With the Largest Average Homes

On average, the state with the largest homes is Utah, followed by other states in the Mountain West, including Colorado, Idaho, and Wyoming. This chart shows the 10 states with the largest average home sizes in the U.S., along with their median price per square foot.

States With the Most Expensive Cost per Square Foot

In states with a high cost per square foot, homes tend to be smaller on average. The smallest homes are in Hawaii, where the median price per square foot is nearly $744. New York has the next smallest real estate, with a median price per square foot of more than $421. (New York City, however, has a median price of $1,519.57 per square foot.)

That said, home prices and size don’t always have an inverse relationship. California has some of the most expensive real estate in the country, but its home sizes average 1,860 square feet. Along with cost per square foot, some other factors that influence average home size include income levels and the age of the homes.

This chart shows states with the highest median price per square foot, along with their average house sizes. If you’re looking to buy in a less pricey locale, consult a list of the best affordable places to live in the U.S.

Recommended: 12 Tips for First-Time Homebuyers

What to Consider When Buying a Larger Home

Buying a larger home might be appealing if you have a growing family and want space to spread out, but it could have downsides. These are some of the factors to consider before splurging on extra space.

More Expensive Maintenance Costs

Not only may a larger home have a higher initial price tag, but it could also cost you more in maintenance and upkeep. A home repair project can easily cost thousands of dollars, and prices only go up when you have more house to maintain. Before opting for a big home, consider what shape it’s in and any potential renovation costs. You could also do some research on the cost of services in your area to estimate future expenses.

More Time to Clean and Organize

Larger homes take longer to clean and organize than smaller ones. You’ll have to purchase more furniture and spend more time on general upkeep. If you hire cleaners for your house, the cost of each visit will be higher if you have additional rooms that need cleaning.

Located Farther From the City Center

Homes in and around a city are often smaller, while houses with more square feet and land are typically located outside of the urban center. This may not be ideal if you prefer to live near restaurants, theaters, and other urban activities. It could also be a downside if you work in the city and would have a longer and more expensive daily commute.

A Bigger Carbon Footprint

A larger home will require more heat in the winter and air conditioning in the summer. Not only will your energy bills cost more, but your bigger house will use more resources and have a greater impact on the planet. Some newer constructions may offset this footprint with energy-efficient features.

Recommended: Tips to Qualify for a Mortgage

How Much Square Footage Can You Afford?

Before starting the house hunt and the quest for a mortgage loan, it’s worth considering how much square footage you can afford. Even if you get preapproved for a mortgage of a certain amount, you might prefer a smaller loan with lower monthly costs to avoid overburdening your budget. Many first-time homebuyers opt for a smaller starter home before eventually upsizing. One way to figure out how much house you can afford is with the 28/36 rule.

The 28/36 Rule

The 28/36 rule is a guideline that can help you estimate what price house you can afford. This rule suggests spending no more than 28% of your gross monthly income on housing costs and no more than 36% on all your debt combined, such as housing costs, car payments, and student loans.

Let’s say, for example, that your monthly gross income is $6,000. Using this guideline, you’d want to keep housing costs at $1,680 per month or lower. If you have other debts, you wouldn’t want to spend more than $2,160 on those debts and housing costs combined.

Key Reasons to Purchase a Smaller Home

Purchasing a smaller home can have several benefits, including:

•   A smaller mortgage: A smaller home may have a lower cost, so you might be able to make a lower down payment and take out a smaller mortgage loan.

•   More affordable bills: With less square footage, you’ll have lower monthly bills when it comes to electricity, heating, and cooling. Plus, you won’t have to pay as much in property taxes.

•   Easier and cheaper maintenance: Smaller homes can be easier to clean and maintain, and you won’t have to spend as much on furniture and decorations.

•   Extra room in your budget for other goals: If you’re saving money on housing, you’ll have more money for other things, such as home renovation projects, travel, investing for the future, and dining out.

The Takeaway

The average size of a U.S home is more than 2,400 square feet, but sizes have slightly decreased recently due to rising costs and interest rates. Home sizes also vary greatly by state, with the average square footage in some states more than double that in others.

Before splurging on a big house, consider your budget carefully. Use the 28/36 rule to estimate how much house you can afford, and take your other financial goals into account when considering how much you want to spend on housing each month. With careful planning, you can find a house that meets your needs without overstretching your budget.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

Are basements included in home square foot calculations?

Basements may or may not be included in home square foot calculations, depending on the state where you live and the basement’s condition. If the basement is included, it generally must meet certain criteria for living space, such as having an entrance and exit point that leads outside the home.

How much square footage does a family of four need?

While everyone’s needs are different, one guideline for determining the ideal square footage for one’s family size is 600 to 700 square feet per person. For a family of four, that would be a home with 2,400 to 2,800 square feet.

Is the average house size in the US increasing or decreasing?

The average house size in the U.S. increased significantly over the past 75 years, from 909 square feet in 1949 to 2,405 square feet in 2025. However, the past couple of years have seen a slight decrease in house sizes, largely due to rising interest rates and worsening affordability.

Photo credit: iStock/years

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

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