How much does a $ 300,000 mortgage cost and how do I get one?
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The median home price has exceeded $ 300,000 over the past five years, according to data from the Federal Reserve. If you are looking for a mortgage loan of $ 300,000, the purchasing power that that amount will give you depends on several factors, including where you buy, your credit and the interest rate you receive.
Here’s how to get a $ 300,000 mortgage and what you need to know about what your monthly mortgage payment might look like.
What is the monthly payment for a $ 300,000 mortgage?
The answer to this question depends on several variables. When calculating your monthly mortgage payment, you need to consider your interest rate, the price of your home, the length of your loan, the amount of your down payment, and whether you need to pay for private mortgage insurance or a PMI.
For example, a lower interest rate or a larger down payment could lower your monthly payment. But if you take a larger loan or receive a higher interest rate, it could increase your monthly bill.
Manually estimating your monthly mortgage payment involves complex calculations. But you can also use a mortgage payment calculator to easily get an idea of your monthly payment amount on a $ 300,000 mortgage. Here are two examples.
Example of a 30-year mortgage
Suppose you want to take out a 30-year, $ 300,000 mortgage with an annual percentage rate of 3%, or APR. Enter the information into your mortgage calculator and you will see that your estimated monthly mortgage payment will be $ 1,265. You will pay more than $ 155,000 in interest over the life of the loan.
A 30-year mortgage is the most popular option because it usually gives you the lowest monthly payment. But the downside is that you will pay more interest over the life of the loan.
Example of a 10-year mortgage
If you decide to take out a 10-year $ 300,000 mortgage with 2% APR instead, you’ll have an estimated monthly payment of $ 2,760 and pay approximately $ 31,000 in interest over the repayment term. Your estimated monthly payments will be higher than with the 30-year term, but you’ll save over $ 100,000 in interest.
Shorter repayment terms usually come with lower interest rates.
Keep in mind that these examples do not take into account additional expenses, such as your closing costs or the amount of down payments.
You can learn more about your mortgage options, and compare the rates of several lenders, with Credible.
What are the parts of a mortgage payment?
A mortgage payment includes principal and interest, and sometimes additional costs are built into the loan.
- Main balance – This is the amount you originally borrowed; a portion of your mortgage payment is applied directly to your outstanding loan balance. As you pay off your loan over the years, the amount of your payment that goes towards the principal increases.
- The interest – This is the amount a lender charges you for borrowing money. Your interest rate and the length of your loan determine how much you will pay over the life of the loan. In the first few years of your mortgage, more of your payment will go to pay interest.
- Escrow Fee – If you choose to use an escrow account or if your lender requires it, your property taxes and insurance premiums (such as home insurance or mortgage loan insurance) will be included in your mortgage payment.
What is the PMI?
Private mortgage insurance, or PMI, is usually required if you take out a conventional loan (not guaranteed by the government) with a down payment of less than 20%. This type of insurance protects a lender in the event that you cannot repay your loan.
The amount you pay is based on a percentage of your loan and is added to your mortgage payment, prepaid, or a combination of both options.
How much interest will I pay on a $ 300,000 mortgage?
Your interest rate and the length of your loan have a huge impact on the amount of interest you will pay over the life of a mortgage.
To calculate the interest you will pay over the life of the loan, follow these two simple steps.
- Calculate the total cost of the loan by multiplying your total monthly payments by the total number of months.
- Subtract the principal balance from the total cost of the loan.
Here are a few examples that demonstrate it.
- Loan of $ 300,000 over 30 years at 3% interest – In this example, your monthly payment is $ 1,265. To find the total cost of the loan, multiply that number by 360 (12 x the loan term) to get $ 455,400. Then subtract the principal amount of $ 300,000 from $ 455,400.
Total amount of interest paid: About $ 155,400
- Loan of $ 300,000 over 15 years at an interest rate of 2.75% – For this example, you need to consider the shorter term of the loan – the monthly payment is $ 2,036. First, multiply the monthly payment of $ 2,036 by 180 (15 x 12) to get $ 366,480. Then subtract $ 300,000 from $ 366,480.
Total amount of interest: About $ 66,480
- Loan of $ 300,000 over 10 years at 2% interest – Based on this scenario, your monthly payment would be $ 2,760. To find the total number of multiple payments, multiply 12 by 10 to get 120. Then multiply 120 by $ 2,760 for a result of $ 331,200.
Total amount of interest: About $ 31,200
You may find that the shorter the term of your loan, the lower your total interest charges will be. Conversely, having a longer loan usually means that you will pay a higher amount of interest over the life of the loan. The length of the loan you choose will depend on your priorities and your budget. If it’s more important to you to have the lowest possible monthly payment, you’ll want to go for a longer term. If paying less interest is your priority, a shorter term will make more sense.
How to get a $ 300,000 mortgage
These nine steps can help you get a $ 300,000 mortgage and buy a home.
- Define your budget. First, take a look at your monthly income, expenses, and debt to see how much you can afford to spend on a down payment, closing costs, monthly mortgage payment, mortgage insurance, and homeowners association fees. . If you need help, consider using a mortgage affordability calculator.
- Check your credit. Your credit history and credit rating are key factors lenders consider find out if you qualify for a mortgage. And if you qualify, your credit helps determine your loan amount and the interest rate. To get the best deal possible, check your credit report for errors and look for ways to improve your score (like paying off other debt) before you apply.
- Get pre-approved. Before finding a home, it is a good idea to get a pre-approval letter for a loan from several lenders. This letter gives you an estimate of how much you can borrow and shows sellers (and real estate agents) that you are a serious buyer.
- Compare mortgage rates and offers. Comparing prices for a mortgage can help you get the best deal available to you. Be sure to compare key factors, such as fees, APRs, closing costs, and mortgage insurance.
- Find and bid on a house. When you find the home you are looking for, place an offer on it based on comparable homes in the area. Hire a real estate agent in your area if you need help.
- Apply for a mortgage. If your offer is accepted, complete and submit your lender’s mortgage application. Be prepared to submit important documents, such as W-2 forms, bank statements, tax returns, etc.
- Wait for approval. A lender will review your documents and information to determine if you qualify. If you meet their eligibility criteria, an appraisal will be done to determine the home’s value.
- Complete the last walkthrough and prepare for the shutdown. Take a final tour of the house to make sure it’s ready to move in. Next, prepare for the closing by reviewing the documents you will sign, if any. Also, be sure to shop around for home insurance, as some lenders will ask for proof of it before funding your loan.
- Close your loan. Attend the closing meeting, sign the required documents and transfer the funds for your down payment and closing costs to receive the keys to your brand new home!
Credible makes it easy to compare the rates of several lenders and find the best mortgage lender for your needs.
Where to get a $ 300,000 mortgage
You can get a $ 300,000 mortgage loan from a variety of places including banks, credit unions, and online lenders. Each option has advantages and disadvantages. For example, if you apply for a mortgage with a bank with which you already have an account, you may be entitled to a reduction on your interest rate or closing costs. But the bank might have stricter lending standards than government-backed loan programs.
If you choose to apply to a credit union, you could get a good deal since these are member-owned non-profit institutions. However, to apply for a mortgage with a credit union, you must be a member and you will need to meet the membership criteria.
Finally you can benefit from a lower mortgage rate with an online lender compared to a traditional bank as they have lower overhead costs. But if you prefer face-to-face customer service, this won’t be your best option.
Before making a decision, research and compare loan offers from several lenders to find the best deal for your unique financial situation.