When you buy a home, you’re likely paying more than just the down payment and closing costs. You’ill probably also need to purchase homeowner’s insurance. While this coverage is not mandated by law, many mortgage lenders require it before they agree to finance the purchase of your home.
Here’s what first-time homebuyers need to know before shopping for homeowners insurance.
What Does Homeowners Insurance Cover?
Homeowners insurance coverage provides protection for both a home and its contents against damage, theft, and up to 16 named perils, including fire, hail, windstorms, smoke, vandalism, and theft. It also typically includes personal liability coverage for accidents that may happen on the property (think of people slipping and falling down your stairs, or your dog biting a neighbor on the property).
On the flip side, basic homeowners insurance likely won’t cover damage from disasters such as floods and earthquakes, and even war (seriously). Homebuyers who live in an area prone to certain events or natural disasters may want to consider supplemental coverage. In some cases, their lender may even require it.
It’s a good idea to learn what’s generally covered by each homeowners insurance policy type — and what isn’t — to ensure you have the right protection in place.
When You Need to Buy Homeowners Insurance
If buyers plan to get a mortgage to purchase their home, their lender will likely require they obtain homeowners insurance coverage before signing off at closing.
In reality, this is a sound business tactic, as the lender will want to protect its investment, which is the property, not the person it’s lending to (harsh, we know). Let’s say the home is damaged in a windstorm or burns to the ground. Insurance will cover the cost, after a deductible, without burdening the homeowner. The homeowner can then continue to pay their mortgage on time, much to the delight of the lender.
Again, if you live in an area prone to certain disasters like floods or earthquakes, your lender may require additional coverage. Check with your lender on what’s necessary before signing.
If a person’s first home happens to be a condo or co-op, the board may also require specific coverage, thanks to a shared responsibility for the entire complex.
Technically, there are no laws requiring a person to obtain homeowners insurance, but it’s a rule put in place by many lenders.
If you’re paying cash for a new home, you can forgo purchasing homeowners insurance, though that may be a risky proposition.
Think you can somehow snake the system? Think again. If a lender doesn’t feel that the homebuyer is working hard or fast enough to find homeowners insurance before closing, the lender may go ahead and purchase insurance in that person’s name with what’s called “lender-placed insurance.”
This isn’t as cool as it sounds. Not only will it increase the mortgage payment, lender-placed insurance is typically more expensive than traditional homeowners insurance. And it may not even provide all the protection a homeowner needs or wants.
To give yourself enough time to find the right policy for you, aim to start shopping around a good 30 days before closing.
How Much Coverage a Person Needs
How much homeowners insurance a new homeowner needs will depend on the value of their home and the possessions in it. As a first step, would-be homeowners can ask their agent for a recommended amount of coverage.
After determining that number, it’s also a good idea to take stock of belongings and see if any items may require additional coverage (think expensive antiques, paintings, or other irreplaceable items). It could also be smart to photograph and digitally catalog major items in a home for proof needed on any claims.
Replacement cost coverage pays the amount needed to replace items with the same or similar item, while actual cash value coverage only covers the current, depreciated value of a home or possessions.
This means that if you have actual cash value coverage and disaster hits, you’ll only be able to get enough cash for the depreciated value of the home and items, not the cost of what it may take to replace them.
Most standard homeowners insurance policies cover the replacement cost of a physical home and the actual cash value of the insured’s personal property, but some policies and endorsements also cover the replacement cost of personal property.
The upshot: It’s best to go for replacement cost coverage whenever possible.
Is homeowners insurance required to buy a home? If you’re taking out a mortgage, that’s almost always a “yes.” It’s worth looking at your options — and understanding what will and will not be covered — so you can feel at ease in your new home for years to come.
Of course, shopping for homeowners insurance often requires considering several options, from the amount of coverage to the kind of policy to the cost of the premium. To help simplify the process, SoFi has partnered with Experian to bring customizable and affordable homeowners insurance to our members.
Experian allows you to match your current coverage to new policy offers with little to no data entry. And you can easily bundle your home and auto insurance to save money. All with no fees and no paperwork.
Check out homeowners insurance options offered through SoFi Protect.
Insurance not available in all states.
Experian is a registered service mark of Experian Personal Insurance Agency, Inc.
Social Finance, Inc. ("SoFi") is compensated by Experian for each customer who purchases a policy through Experian from the site.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
A jumbo loan is a mortgage that is larger than the loan-servicing limits set by the Federal Housing Finance Agency (FHFA). If you know you need a large loan to cover a higher home mortgage loan, you might be wondering how to qualify for a jumbo loan.
Jumbo loan qualifications are more stringent than conforming conventional loans. Because a jumbo loan is a nonconforming loan, banks take on more risk as they are not able to sell the loan to government-sponsored enterprises Fannie Mae and Freddie Mac. Since the loans are not guaranteed by the government, lenders are more cautious about the type of borrowers they do business with.
What this means for your money: You need conditions to be pretty optimal to qualify for a jumbo loan. But it can be done. Learn more here, including:
• How to qualify for a jumbo loan
• What factors lenders consider for jumbo loans
• The jumbo loan qualification process
• How to decide if a jumbo loan is right for you
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Jumbo Mortgage Requirements
The current limits for jumbo loans are defined as exceeding $726,200 for single-family homes, except in Alaska, Hawaii, and some federally designated markets that are considered high-cost. In those areas, the limit that’s exceeded is $1,089,300 since these locations tend to have pricier housing markets.
Jumbo mortgage requirements are similar to conventional conforming loan requirements, but there are some key differences that make them harder to qualify for.
A High Credit Score
Experts recommend a credit score of 700 or above for jumbo loan borrowers. A higher credit score when buying a house is indicative of a borrower’s behavior with credit and how likely they are to repay the loan. A higher credit score is needed for the higher loan amounts of a jumbo loan. That lofty score can help the lender feel more secure that you’ll pay back the amount you borrow.
Cash Reserves
A cash reserve is how much liquid money you have at your disposal. What counts as liquid money can vary from lender to lender. For example, some will allow a percentage of vested 401(k) funds to count toward the reserve requirement. Others do not.
Because jumbo loans are so large, lenders look for cash reserves in your account to guard against default. For the best jumbo loan terms, lenders can require as much as 12 months of reserves.
A Low Debt-to-Income Ratio
A debt-to-income ratio is the amount of income you make relative to the amount of debt obligations you have. If you have what is considered too much debt, the lender will not offer a loan to you. With jumbo loans, a healthy DTI ratio is essential to qualify for the mortgage. A DTI ratio below 43% is recommended or possibly a lower figure.
What Does the Jumbo Qualification Process Include?
When you’re looking at jumbo loan requirements and the qualification process, there are some things you should keep in mind. Here, what’s needed to get a mortgage:
Documents Required for Jumbo Loan
When you apply for a jumbo loan, the lender will look to verify the information you provided. Some documents you may be required to provide include:
• Two years of tax returns
• Profit & Loss (P&L) statement if you’re a business owner
• Pay stubs
• Bank statements
• Documentation for other income
Loan-to-Value Ratio Evaluation
In addition to your application, the jumbo loan will require an appraisal of your property to ensure they’re not lending too much on the home (that is, more than it’s worth). This appraisal will ensure the home’s price is not too high and determine that the loan-to-value ratio (LTV) is within its guidelines.
Evaluating How Jumbo Down Payments Will Impact You
How much you put down on the home of your dreams will impact what loan you qualify for. If you’re able to put down enough, you may be able to forgo the jumbo loan requirements and get into a conforming conventional loan.
Is a Jumbo Mortgage Right for You? Questions To Ask
When it comes to making a decision on a jumbo loan, it’s helpful to ask yourself some questions that can help determine if a jumbo loan will work for you.
Do I Have Good Credit?
Ask yourself if your credit is strong enough to qualify for a jumbo loan. These mortgages do come with higher loan amounts and higher payments, and a good credit score range (over 700 typically) can help you get the best terms possible to qualify for a jumbo loan.
Do I Have a Low DTI and High Cash Reserves?
It’s important to have a low debt-to-income ratio and ample reserves to qualify for a jumbo mortgage, as discussed above. While some lenders may go up to as high as a 43% DTI, others will want to see a lower number.
Can I Prove I’m in Good Financial Health?
Qualifying for a jumbo mortgage goes beyond the numbers. Can you demonstrate to the lender that you’re able to continue making payments? Do you have a consistent job history? Are all the other financial factors in your life lined up so you can afford the mortgage?
Is the Property Value High Enough for a Jumbo Loan?
The jumbo loan value minimum (and conforming loan limits) is $726,200 for most areas in the U.S. If your mortgage is below this amount, you’ll want to look at financing with a conforming conventional loan instead. In high-cost areas, the home would have to hold a value of more than $1,089,300.
Do I Have Enough Money Saved?
A down payment on a property that merits a jumbo loan will often be a significant amount of cash. And while some closing costs are a flat fee that won’t go up, many are labor-intensive or percentage-based (3% to 6% of the loan amount), so your jumbo loan closing costs are larger than for a conventional, conforming loan.
If you are in the market for a high-value home, a jumbo mortgage can help you make it your own. However, you will need to meet the loan requirements, which may be somewhat more demanding than those for a conforming loan. By focusing on optimizing your credentials and financial profile, you can work to secure the mortgage that makes your home-ownership dreams come true.
When you’re ready to take the next step, consider what SoFi home loans have to offer. Jumbo loans are offered with competitive interest rates, with no PMI, and down payments as low as 10%.
SoFi Mortgage Loans: We make the home loan process smart and simple.
FAQ
Is it harder to qualify for a jumbo loan?
Yes, jumbo loans are harder to qualify for. You will need a larger down payment than you would with a conforming loan, a higher credit score, a low debt-to-income ratio, more cash reserves, and a tighter loan-to-value ratio.
What credit score do you need for a jumbo loan?
For a jumbo loan, you may want to aim for a credit score above 700.
Do jumbo loans require a 20% down payment?
It is possible to obtain a jumbo loan with a down payment as low as 10% or possibly even lower.
Photo credit: iStock/lovenimo
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility 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.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
When you’re considering applying for a mortgage, one of your top questions is probably “What is the monthly payment going to be?”
For a 100K mortgage, the payment on a 30-year loan at 7% interest would be $665.30. For a 15-year mortgage loan term, the payment increases to $898.83, which helps you pay off the loan sooner and pay less in interest costs over the entire loan.
Your own loan will depend on a number of factors, including but not limited to fluctuating interest rates. Here’s what goes into a 100K mortgage, what income is required to get one, and what your payments would look like over the life of the loan.
• The monthly cost of a $100,000 mortgage depends on factors such as interest rate, loan term, and property taxes.
• Using a mortgage calculator can help estimate the monthly cost of a $100,000 mortgage.
• Additional expenses like homeowners insurance and maintenance should be considered when budgeting for homeownership.
• Getting pre-approved by a lender can provide a clearer understanding of the monthly cost of a $100,000 mortgage.
• It’s important to review and compare mortgage options to find the best terms and rates for a $100,000 mortgage.
Total Cost of a 100K Mortgage
The total cost of a 100K mortgage goes beyond the monthly payment. There are upfront costs and ongoing, long-term costs to consider, all of which affect how much house can you afford.
Upfront Costs
Upfront home loan costs can include:
• Closing Costs: There are costs you need to pay to get a mortgage, but they are not a part of the original loan. These are known as closing costs and include things like the mortgage origination fee, the cost of an appraisal, attorney fees, title fees, taxes, prepaids, and other expenses. With the average closing cost on a new home adding between 3% and 6%, that works out to $3,000 to $6,000 on a 100K mortgage.
• Down Payment: Unless you are able to obtain a 0% down payment loan, you’ll need some money to afford the down payment on a 100K mortgage loan.
The average down payment on a home is 13%, as per the National Association of Realtors®. This works out to $13,000 on a $100,000 home.
If you don’t quite have this amount, there are other types of mortgage loans that offer low down payment options. 3% and 3.5% are common, which would come out to $3,000 and $3,500 for the down payment on a 100K home.
Long Term Costs
Here are the ongoing costs of a mortgage loan:
• Interest. The biggest expense you’ll have over the life of the loan is interest. Interest costs are huge, especially in an economy with higher annual percentage rates (APRs). You’ll pay more in interest than you do in principal if you keep the mortgage loan for the whole 30-year loan term.
For a $100K mortgage with a 30-year term and 7% APR, the interest costs total $139,508.90.That’s on top of the $100,000 original loan amount. Adding the two together, you’re looking at paying $239,508.90 for the original 100K mortgage. Take a look at our mortgage payment calculator or the amortization table further down if you’re more curious about this amount.
• Escrow. You may pay for taxes and insurance through your escrow account every month. This expense doesn’t go away, even when you pay off your mortgage. The amount of tax and insurance varies by state and policy.
Estimated Monthly Payments of a 100K Mortgage
Payments on a 100K home will ultimately be determined by your loan term and interest rate. And the interest rate is determined by a number of factors. Of course, the Fed’s rate matters, but so too do such aspects as:
• Credit score. A good credit score can afford you a lower interest rate on your mortgage.
• Down payment. Generally, putting down a larger down payment affords you a lower interest rate.
• Home location. There are certain areas where you may be offered a lower interest rate just because of where you live.
• Loan amount. If you need a larger loan, such as a jumbo loan, you’ll usually see a higher interest rate. The same can be true of much smaller homes, such as tiny homes.
• Interest rate type. If you choose a loan with an adjustable APR, you may initially have a lower interest rate.
• Loan type. You’ll see different interest rates based on what loan type you’re using. Examples include VA loans, FHA loans, and a USDA loan which may offer a lower (or no) down payment as well as lower interest rates.
It’s helpful to see what potential mortgage loan payments on a 100K mortgage may be, adjusting for term length and APR variance. Keep in mind these costs do not include escrow items, such as taxes or insurance.
APR
Monthly Payment on a 30-Year Loan
Monthly Payment on a 15-Year Loan
3.5%
$449.04
$714.88
4%
$477.42
$739.69
4.5%
$506.69
$764.99
5%
$536.82
$790.79
5.5%
$567.79
$817.08
6%
$599.55
$843.86
6.5%
$632.07
$871.11
7%
$665.30
$898.83
7.5%
$699.21
$927.01
8%
$733.76
$955.65
8.5%
$768.91
$984.74
9%
$804.62
$1,014.27
9.5%
$840.85
$1,044.22
10%
$877.55
$1,074.61
How Much Interest Is Accrued on a 100K Mortgage?
Each month, your payment is split into principal and interest payments. Those interest payments go to the bank as payment for lending you money. Principal payments go toward the original loan amount and pay down the loan.
The longer the loan term, the more you’ll pay in overall interest. For a 100K mortgage on a 30-year term with a 7% APR, the interest costs total $139,508.90 on top of the original loan.
On a 15-year term with the same parameters, the interest costs are a more modest $61,789.09. Yes, your monthly payments are higher, but the difference between a 15 vs. 30 year mortgage with 7% APR is significant.
The amortization of a 100K mortgage shows how much of your monthly payment pays off the loan each month.
You can see in the early years of your mortgage, more of your monthly payment goes toward interest, and very little of your loan is paid off. In later years, more of the payment will go toward the principal.
Year
Monthly Payment
Beginning Balance
Total Amount Paid
Interest
Principal
Ending Balance
1
$665.30
$100,000.00
$7,983.60
$6,967.81
$1,015.79
$98,984.19
2
$665.30
$98,984.19
$7,983.60
$6,894.39
$1,089.21
$97,894.95
3
$665.30
$97,894.95
$7,983.60
$6,815.64
$1,167.96
$96,726.96
4
$665.30
$96,726.96
$7,983.60
$6,731.21
$1,252.39
$95,474.55
5
$665.30
$95,474.55
$7,983.60
$6,640.66
$1,342.94
$94,131.59
6
$665.30
$94,131.59
$7,983.60
$6,543.59
$1,440.01
$92,691.55
7
$665.30
$92,691.55
$7,983.60
$6,439.49
$1,544.11
$91,147.41
8
$665.30
$91,147.41
$7,983.60
$6,327.86
$1,655.74
$89,491.65
9
$665.30
$89,491.65
$7,983.60
$6,208.17
$1,775.43
$87,716.19
10
$665.30
$87,716.19
$7,983.60
$6,079.81
$1,903.79
$85,812.38
11
$665.30
$85,812.38
$7,983.60
$5,942.19
$2,041.41
$83,770.95
12
$665.30
$83,770.95
$7,983.60
$5,794.61
$2,188.99
$81,581.94
13
$665.30
$81,581.94
$7,983.60
$5,636.38
$2,347.22
$79,234.69
14
$665.30
$79,234.69
$7,983.60
$5,466.70
$2,516.90
$76,717.75
15
$665.30
$76,717.75
$7,983.60
$5,284.75
$2,698.85
$74,018.87
16
$665.30
$74,018.87
$7,983.60
$5,089.64
$2,893.96
$71,124.88
17
$665.30
$71,124.88
$7,983.60
$4,880.45
$3,103.15
$68,021.68
18
$665.30
$68,021.68
$7,983.60
$4,656.10
$3,327.50
$64,694.16
19
$665.30
$64,694.16
$7,983.60
$4,415.56
$3,568.04
$61,126.09
20
$665.30
$61,126.09
$7,983.60
$4,157.62
$3,825.98
$57,300.08
21
$665.30
$57,300.08
$7,983.60
$3,881.03
$4,102.57
$53,197.49
22
$665.30
$53,197.49
$7,983.60
$3,584.46
$4,399.14
$48,798.32
23
$665.30
$48,798.32
$7,983.60
$3,266.46
$4,717.14
$44,081.14
24
$665.30
$44,081.14
$7,983.60
$2,925.44
$5,058.16
$39,022.95
25
$665.30
$39,022.95
$7,983.60
$2,559.78
$5,423.82
$33,599.10
26
$665.30
$33,599.10
$7,983.60
$2,167.69
$5,815.91
$27,783.17
27
$665.30
$27,783.17
$7,983.60
$1,747.26
$6,236.34
$21,546.80
28
$665.30
$21,546.80
$7,983.60
$1,296.45
$6,687.15
$14,859.60
29
$665.30
$14,859.60
$7,983.60
$813.02
$7,170.58
$7,688.98
30
$665.30
$7,688.98
$7,983.60
$294.64
$7,688.96
$0.00
What Is Required to Get a 100K Mortgage?
When you’re applying to qualify for a mortgage, lenders look for a few key things to approve your application.
• How much debt you will be carrying. Lenders look for your monthly payment to be lower than 28% of your gross monthly income. A 100K mortgage payment at 7% interest on a 30-year term is $665.30. For this payment to be less than 28% of your monthly income, your monthly income needs to be over $2,376, assuming you have no debt. This turns into a $28,512 yearly salary requirement to afford a 100K mortgage payment.
If you have debt, the calculation changes a little bit. Your lender will add your monthly debts to your projected monthly mortgage payment. These two numbers added together need to be less than 36% of your monthly income. This calculation a lender does is known as the debt-to-income ratio, or back-end ratio.
• Credit score. It’s advisable to have a credit score of 620 or higher when applying for a mortgage loan.
• Consistent work history. If you are unemployed, self-employed, or have recently changed jobs, lenders may be less likely to approve your loan. They may worry about your having a steady enough income to make your payments.
The Takeaway
A 100K mortgage will have a monthly cost that varies depending on such factors as the loan’s interest rate, the term of the loan, and whether it’s a fixed- or variable-rate loan. By understanding more about how the cost of a mortgage is calculated, plus the related costs, you can be better prepared for the milestone of being a homeowner.
When you’re ready to apply for a mortgage, SoFi will be there for you. Our rates are competitive, and we offer flexible loan terms and down payment options (as little as 3% for first-time homebuyers) to suit your needs. The online application simplifies the process, and our dedicated Mortgage Loan Officers can help you every step of the way.
See how smart and simple a SoFi Mortgage Loan can be.
Photo credit: iStock/AndreyPopov
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility 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.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
As far as the simple math goes, a $200,000 home loan at a 7% interest rate on a 30-year term will give you a $1,330.60 monthly payment.
That $200K monthly mortgage payment includes the principal and interest. But here’s where options become evident: How much your interest will cost you each month is determined by your mortgage term and interest rate. You might pay a lower or higher annual percentage rate (or APR), and you might opt for a variable rate loan or a different term (say, 15 years).
Understanding what your total mortgage will cost vs. just the payments on a $200K mortgage can be a smart way to look at your finances when you’re buying a home. If you want to know the full cost of a $200K mortgage, read on for the breakdown so you can make the best decision for your home purchase.
The total cost of a $200,000 mortgage may surprise you. Beyond the principal, there are upfront costs to acquire the mortgage as well as long-term costs that come from paying years of interest. Here’s a closer look.
Key Points
• A $200,000 mortgage can cost around $1,000 per month, depending on the interest rate and loan term.
• Factors that affect the monthly cost of a mortgage include the loan amount, interest rate, loan term, and property taxes.
• Private mortgage insurance (PMI) may be required if the down payment is less than 20% of the home’s value.
• Homeowners insurance and property taxes are additional costs to consider when budgeting for a mortgage.
• It’s important to carefully consider your budget and financial goals before taking on a mortgage to ensure you can comfortably afford the monthly payments.
Upfront Costs
These expenses can include the following:
• Closing costs: What you pay to secure a mortgage for the property you want. They include fees for appraisals, title insurance, government taxes, prepaid expenses, and mortgage origination fees.
The average closing cost on a new home is between 3% and 6% of the loan amount. This works out to be between $6,000 and $12,000 for a 200K mortgage.
• Downpayment: While the average down payment on a home is around 13%, you can often elect to put down an amount that works for your financial situation. This is cash you put down vs. the amount you borrow for your mortgage. Some of the most common amounts for a down payment on a $200,000 house can be:
◦ 20% down payment: $40,000
◦ 10% down payment: $20,000
◦ 5% down payment: $10,000
◦ 3.5% down payment: $7,000
◦ 3% down payment: $6,000
Long-Term Costs
The total cost for a 200K mortgage at today’s interest rates is almost half a million dollars. Over the course of the 30-year loan on a $200K mortgage at 7% APR, you will pay $279,017.80 in interest for a total cost of $479,017.80.
It’s a bit of a surprise to most borrowers that the amount they will pay in interest exceeds the price of the home. After all, $279,000 in interest costs for a $200,000 home doesn’t seem like it would come from a 7% APR, but that’s how mortgage APR works.
By choosing a mortgage term that’s 15 years, you substantially decrease the total 200K mortgage cost. The monthly payment on a 15-year loan at 7% APR increases to $1,797.66 from $1,330.60 for a 30-year mortgage. But 15 years of interest will cost $123,578.18 with a 7% APR, bringing the total cost of the principal plus interest to $323,578.18.
To compare the 15-year vs. 30-year mortgage that costs $479,017.80, that’s a savings of $155,439.62. In short, if you’re able to pay another $450 on your mortgage every month, you’ll save over $100,000 during the course of your loan.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Estimated Monthly Payments of a 200K Mortgage
Since interest costs can vary so much, here’s a handy table to help you estimate what your monthly home mortgage loan costs would be for a $200,000 mortgage. The APR can vary considerably, depending on the lender, whether you choose variable or fixed rate, and other loan specifics.
The APR makes a huge difference in your monthly payment. When your monthly payment is increased because of a higher interest rate, you’ll pay hundreds of dollars more each month as well as tens, if not hundreds, of thousands more over the course of the loan.
Here’s what your monthly $200K mortgage payment and total loan cost will look like in 15-year and 30-year loan terms with different APRs.
APR
15-year loan payments
Total loan cost (200K + interest)
30-year loan payments
Total loan cost (200K + interest)
3.5%
$1,429.77
$257,357.71
$898.09
$323,312.18
4%
$1,479.38
$266,287.65
$954.83
$343,739.01
4.5%
$1,529.99
$275,397.58
$1,013.37
$364,813.42
5%
$1,581.59
$284,685.71
$1,073.64
$386,511.57
5.5%
$1,634.17
$294,150.04
$1,135.58
$408,808.08
6%
$1,687.71
$303,788.46
$1,199.10
$431,676.38
6.5%
$1,742.21
$313,598.65
$1,264.14
$455,088.98
7%
$1,797.66
$323,578.18
$1,330.60
$479,017.80
7.5%
$1,854.02
$333,724.45
$1,398.43
$503,434.45
8%
$1,911.30
$344,034.75
$1,467.53
$528,310.49
8.5%
$1,969.48
$354,506.24
$1,537.83
$553,617.71
9%
$2,028.53
$365,135.97
$1,609.25
$579,328.28
9.5%
$2,088.45
$375,920.89
$1,681.71
$605,415.03
10%
$2,149.21
$386,857.84
$1,755.14
$631,851.53
Again, it’s pretty shocking to see that a $200K mortgage could possibly cost over $600,000 with a 10% interest rate on a 30-year loan. If you want to play around with different numbers, this mortgage payment calculator can help.
200K Mortgage Amortization Breakdown
Amortization shows you how much of your monthly payment is applied to the original loan amount, or principal.
Loans are amortized so that most of your monthly payment goes toward interest each month when you’re just starting to repay your loan. When you’re toward the end of your loan term, most of the money goes toward the principal.
In the example below, of $200K mortgage payments and balances, you’ll see that over the course of the first year, the borrower made $15,967.20 in payments ($1,330.60 per month for 12 months). Of this, $13,935.65 is applied to interest and only $2,031.55 to the principal.
To qualify for any mortgage, you will need to show that you can afford a down payment, have a solid credit score, and have a consistent work history, among other factors.
One key qualification is your ability to afford the loan you are applying for. An example: For a $200,000 mortgage with a $1,330.60 payment, lenders look for your housing expenses to be between 25% and 28% of your gross income. That means your monthly income should be at least $4,752.14 for the $1,330.60 payment to meet that guideline. That’s just over $57,000 per year if you have no other debts.
Another way lenders look at how much house you can afford is your debt-to-income ratio (aka your DTI). Lenders look for your total debt expenses (including the new housing payment) to be no more than 36% of your gross monthly income. For a borrower making $10,000 per month, for example, debts should not exceed $3,600 per month, including the new housing payment.
To find your debt-to-income ratio, multiply your monthly income by .36. Set that number aside. Next, add up all of your debt obligations, including car payments, credit cards, hospital bills, etc. Then, add in your new mortgage payment to your existing debt payments.
As a formula, it looks like this:
• Monthly income X .36 = Max debt-to-income ratio.
• Mortgage payment + debts = Total debts
• Max debt-to-income ratio > total debts
Compare the two numbers to see where you stand with the maximum DTI versus your total debts. If you’re not in the desired range, know that some lenders will allow a higher percentage; you might shop around if your DTI is above the 36% mark. However, the terms might not be as desirable. It can be wise to explore your options with a mortgage professional or look online at a home loan help center.
This is an example of why you always hear the advice to pay down debt to qualify for a better, bigger mortgage. The amount of debt you have directly affects how much mortgage you’re able to qualify for.
The Takeaway
Understanding the monthly and total cost of a $200K mortgage can help you understand the options available for financing a home purchase, as well as understand the implications on your long-term financial situation. You can then assess what’s possible and make decisions about the best way to finance a $200K mortgage.
With any mortgage, you’ll want a lender on your side. SoFi Mortgage Loans have dedicated loan officers waiting to help. Competitive interest rates, low down payment options, and a wide range of loan terms can help you make a mortgage for your home possible.
See how smart, flexible, and simple a SoFi Mortgage Loan can be.
FAQ
How much is a down payment on a 200K house?
A 20% down payment on a 200K house is $40,000. A 5% down payment is $10,000, and a 3.5% is $7,000. Talk with various lenders to see what you might qualify for.
How can I pay a 200K mortgage in 5 years?
Making extra payments or larger lump-sum payments can help you pay off your mortgage faster. For a $200K mortgage amortized over 5 years, you’ll need to pay the original loan amount of $200K, plus five years of interest payments. If you look at the full 30-year amortization chart (above), that’s $68,099.48 in interest and a total of $268,099.48 you’ll need to pay back to the lender.
Over five years and 60 equal payments, this works out to $4,468.32 each month to pay off your mortgage in five years. (Quick side note: the amount of interest you’ll pay in an accelerated five-year repayment plan won’t nearly be this much because your extra payments to the principal will decrease the amount of interest you pay every year.)
How much mortgage can I qualify for on a 200K salary?
How much mortgage you qualify for depends on your income, debt levels, down payment, loan program, and credit score, among other factors. As a rule of thumb, you may be able to qualify for homes between 2 and 3 times your gross annual salary. For a $200K salary, you may be looking for homes in the $400K to $600K range.
Photo credit: iStock/AnnaStills
SoFi Mortgages
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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.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
While it is possible to buy a second home without a down payment, the scenarios where you can do so are quite rare.
Traditional zero-down payment programs may not be available to you because you’re no longer a first-time homebuyer. Lenders are also hesitant to offer second home mortgages with low down payments. The down payment requirements for a second home are usually 10% or more.
But you may be in luck: Sometimes you can figure out how to buy a second home with no down payment. Read on to learn:
• What does buying a second home involve?
• What are the usual down payment requirements for a second home?
• How can you buy a second home with no down payment?
What to Know About Buying a Second Home
Buying a second home comes with a different set of guidelines and rules than purchasing your first home. You’re no longer considered a first-time homebuyer, which disqualifies you from many down payment assistance programs. However, your situation will be treated differently depending on how you want to use the property. Consider the following possibilities:
Moving into the Second Home
If your plan is to keep your first home as a rental property and move into the second home, you may have some options. A low interest mortgage loan may be available in one of two ways.
• USDA loans in approved areas have zero down payment options. You’re allowed to get a second home with a zero-down USDA loan if you meet certain requirements involving citizenship, income, and other factors. You must live in the property as your principal residence, and you cannot have a USDA loan on your first property. In addition, you must financially qualify for both homes. To count rental income for the first home, USDA requires 24 months of rental income history.
Other qualifiers for this kind of loan include:
• The current home no longer meets your needs for certain reasons (for example, if your family is growing and you live in a two-bedroom home, you’re relocating for a new job, or you’re getting divorced).
• You don’t have another way to obtain the property without the USDA loan.
• You can only keep one other house besides the new second home.
If, say, you’re moving from to a new region for a job opportunity and USDA loans are available in the area you’re moving to, it’s possible to keep your first home and buy a second if you meet the above conditions.
Worth noting: An obstacle for borrowers can be that lenders need a way to verify rental income. A signed lease and bank statements may not be enough. Your lender may want to see the rental income reported on your taxes for two years to count.
• VA Loans may also offer zero down payment options. Available to veterans, service members, and surviving spouses, these government-backed loans can only be used to purchase property that will be a primary residence. So, if you’re moving from one place to another and qualify, you can use a VA loan to purchase the next property with no money down.
Buying the Second Home as a Vacation Home or Rental
Is there a way to buy a second home with no down payment if you plan to use it as a vacation home or rental? Options are few and far between if you’re not planning to use the property as your principal residence. When you’re looking at non-owner-occupied financing, lenders usually want a bigger down payment, not a smaller one.
That said, here are a couple of options that could answer the question of how to buy a second home with no down payment:
• Private loans: If you finance through a relative or other private source, it’s possible to obtain a no-money-down mortgage. Terms are agreed upon by both parties.
• Seller financing: Much like a private loan, the conditions of seller financing (aka owner financing) a loan are whatever the two parties agree on. If the seller is willing to let you buy the property with no money down, you might be able to make this work. However, seller financing usually comes with a bigger down payment, not a smaller one.
Do You Need a Down Payment on a Second Home?
Down payment requirements for a second home are usually higher. Lenders also look for a higher credit score. The loftier down payment requirement and credit score reflect the fact that the lender is taking on elevated risk since borrowers are more likely to default on a second home than a first home. A lender may expect your down payment to be right around the average down payment on a house, which is currently 13%.
Yet, your mortgage lender is also looking for a loan that accommodates your unique situation to help you to buy a second home. Though no down payment options are rare, your lender may have access to financial products that allow for a smaller down payment.
Can You Buy Another Home When You Have a Current Mortgage?
If you financially qualify, buying another house when you have a mortgage is possible. Generally speaking, lenders look for a strong credit history and enough income to cover your debts (including the cost of the new mortgage) to determine if you qualify for an additional mortgage.
If you don’t have enough cash for a down payment on a second home, you may be able to tap your home equity. A home equity loan or a home equity line of credit (HELOC) can help you access money to use for a down payment on a second home.
Though not all lenders will permit this, using home equity may be possible if you want to keep your first home and have no other way of obtaining enough money for a down payment on your second.
It may be advisable to get a home equity loan or HELOC while you are still living in your first house. This allows you to qualify for owner-occupant rates, which are typically much lower than non-owner-occupied rates.
While there aren’t many options for financing a second home with no down payment, you may be in luck. There are some no down payment loans available to qualified buyers, and these loans can help you preserve cash for renovations, improvements, and other expenses. Even if you can’t find a no down payment mortgage for a second home, you will likely have a number of financing options you can tap into that may allow you to snag another property.
When you’re thinking about home financing options, whether for a mortgage or a HELOC, you’ll want a flexible, helpful partner to help you through the process. SoFi can do just that. In addition to mortgage loans, we offer a home equity line of credit that can help you tap into your home’s value and use the funds for a variety of purposes. You can access up to 95% of your home’s equity up to $500,000, enjoy low interest rates, and have a dedicated SoFi Mortgage Loan Officer to guide you.
Unlock your home’s value with a home equity loan brokered by SoFi today.
FAQ
What is the minimum down payment for a second home?
For a second that is not going to be your primary residence, most lenders look for at least a 10% down payment.
How do I buy a second home without 20% down?
With a higher credit score and other financial qualifications, you may be able to find a lender or a program with a required down payment less than 20%.
Can I buy another house if I already have a mortgage?
If you’re a qualified buyer with good debt and income levels with a strong credit history, a lender may be able to approve you for a second mortgage.
Can I use my equity to buy another house?
It may be possible to use home equity to buy another home. Contact a lender to go over your unique situation.
Photo credit: iStock/Nuttawan Jayawan
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility 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.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
