Buying a home is not an easy thing to do these days. A glaring lack of inventory has left buyers with limited options, and elevated home prices are making it difficult for buyers to find a home they can afford.
In July, the median U.S. home sold for about $407,000, according to the National Association of Realtors. So if you're in the market for a $300,000 home, you're spending about 25% less than the typical buyer.
But that doesn't mean you're looking at an affordable mortgage payment. Because mortgage rates are up these days, even buying a $300,000 home with a decent-size down payment might leave you scrambling to pay your loan servicer every month.
What will a $300,000 home cost you on a monthly basis?
The average 30-year mortgage rate today is 7.18%, according to Freddie Mac, while the average 15-year mortgage rate is 6.51%. If you sign a 15-year mortgage, your monthly payments will be higher than with a 30-year loan, but you'll rack up less interest on your mortgage loan overall.
Now let's assume you're able to make a 20% down payment on your $300,000 home, leaving you with a $240,000 mortgage balance. With a 30-year loan, based on today's rates, you're looking at a monthly payment of $1,625 for principal and interest. With a 15-year loan, you're looking at a monthly payment of $2,091. Both numbers assume the rates mentioned above.
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As you can see, with a 15-year loan, you'll be paying an extra $466 a month, which is a sum you may not be able to afford. However, you should also know that if you go with a 15-year loan, you'll end up spending a total of $136,413 on interest in the course of paying off your home. If you go with a 30-year loan, you'll end up spending $345,074 on interest. So while an extra $446 a month may be a stretch, if you can swing it, you stand to save yourself almost $209,000 on interest all in.
Can you afford a $300,000 home today?
As a general rule, your predictable housing costs should not exceed 30% of your take-home pay. Going beyond that limit could put you at risk of falling behind on your housing expenses or other bills.
But when we talk about housing costs in this context, we're referring to expenses like homeowners insurance and property taxes as well as a mortgage. So, let's say you're looking at a $1,625 monthly mortgage payment, plus another $375 a month in property taxes and homeowners insurance costs. That brings your housing costs to $2,000 a month.
If you bring home $6,667 a month or more, then that's generally a safe amount of housing expense to take on, provided your other bills aren't above average. But if you only bring home $5,000 a month, then you may not be able to afford a $300,000 home today unless you make a down payment much larger than 20% or truly have minimal expenses outside of housing (for example, if you have zero debt, no childcare costs, and no car to pay for).
You'd think that $300,000 would be a reasonable amount of money to spend on a home. But because mortgage rates are so high, even a modestly priced home becomes expensive.
If you can't afford a home in that price range right now, it could pay to wait a year or so and see if mortgage rates come down. Waiting will also allow you to save up more of a down payment, thereby lowering your monthly costs.
Of course, there's also the option to look at a less expensive home if you're eager to buy today. But given where home prices stand, you may be hard-pressed to find something below $300,000 in many parts of the country.
FAQs
On a $300,000 mortgage with a 6% annual percentage rate (APR), you'd pay $2,531.57 per month on a 15-year loan and $1,798.65 on a 30-year loan, not including escrow. Escrow costs vary depending on your home's location, insurer, and other details.
What income do you need for a 300k mortgage? ›
This field is for validation purposes and should be left unchanged. To afford a $300,000 house, you typically need an annual income between $75,000 to $95,000, depending on your financial situation, down payment, credit score, and current market conditions.
How much would a mortgage be on a $400,000 house? ›
On a $400,000 mortgage with an interest rate of 6%, your monthly payment would be $2,398 for a 30-year loan and $3,375 for a 15-year one.
How much is a mortgage payment on a $350000 house? ›
On a $350,000, 30-year mortgage with a 6% annual percentage rate (APR), you can expect a monthly payment of $2,098.43, not including taxes and interest (these vary by location and property, so they can't be calculated without more detail).
What credit score do you need for a 300 000 home loan? ›
The required credit score to buy a $300K house typically ranges from 580 to 720 or higher, depending on the type of loan. For an FHA loan, the minimum credit score is usually around 580.
How much house can I afford if I make $70,000 a year? ›
With a $70,000 annual salary and using a 50% DTI, your home buying budget could potentially afford a house priced between $180,000 to $280,000, depending on your financial situation, credit score, and current market conditions. This range is higher than what you might qualify for with more traditional DTI limits.
Can I afford a 300K house on a 50k salary? ›
A person who makes $50,000 a year might be able to afford a house worth anywhere from $180,000 to nearly $300,000. That's because your annual salary isn't the only variable that determines your home buying budget. You also have to consider your credit score, current debts, mortgage rates, and many other factors.
How much is a 3.5 down payment on a 300K house? ›
FHA Loan Down Payment
FHA loans are recognized for their flexibility regarding credit, income, and down payment guidelines. They require a minimum down payment of just 3.5%, which is $10,500 for a $300,000 home. Please also note that mortgage insurance premiums are a requirement for all FHA loans.
What credit score is needed to buy a house? ›
Credit score and mortgages
The minimum credit score needed for most mortgages is typically around 620. However, government-backed mortgages like Federal Housing Administration (FHA) loans typically have lower credit requirements than conventional fixed-rate loans and adjustable-rate mortgages (ARMs).
What is the 20% down payment on a $400 000 house? ›
Putting down this amount generally means you won't have to worry about private mortgage insurance (PMI), which eliminates one cost of home ownership. For a $400,000 home, a 20% down payment comes to $80,000. That means your loan is for $320,000.
To afford a $400,000 house, you typically need an annual income between $100,000 to $125,000, which translates to a gross monthly income of approximately $8,333 to $10,417. However, this is a general range, and your specific circ*mstances will determine the exact income required.
How much house can I afford with $10,000 down? ›
If you have a conventional loan, $800 in monthly debt obligations and a $10,000 down payment, you can afford a home that's around $250,000 in today's interest rate environment.
How much income do you need to buy a 300 000 House? ›
How Much Income Do You Need to Buy a $300,000 House? With a 5% down payment and an interest rate of 7.158% (the average at the time of writing), you will want to earn at least $6,644 per month – $79,728 per year – to buy a $300,000 house. This is based on an estimated monthly mortgage payment of $2,392.
How much income do I need for a 350k mortgage? ›
To comfortably afford a $350,000 house, you'll likely need an annual income between $87,000 to $110,000, depending on your specific financial situation and the terms of your mortgage. Understanding your mortgage payments, including principal, interest, taxes, and insurance, is crucial for long-term financial planning.
How much is the monthly payment for a 300k house? ›
The monthly payment on a $300,000 mortgage depends on what interest rate you get and the term you choose. On a 30-year loan at a 7% rate, it would be $1,996 per month toward your principal and interest. Keep in mind that you also have to pay for expenses such as homeowners insurance and property taxes each month.
What are the monthly repayments on a $300000 loan? ›
Compare Repayments on $300,000 Mortgages
A 30 year mortgage at 2.32% should cost you $1,157 principal and interest repayments per month, with $116,692 in total interest charged. A 30 year mortgage at 2.66% should cost you $1,210 principal and interest repayments per month, with $135,768 in total interest charged.
How much is a 20% down payment on a $350 000 house? ›
If you're eyeing a $350,000 house, you should anticipate putting down up to 20% or $70,000.
How much house can I afford with an 80k salary? ›
With an $80,000 annual salary, you could potentially afford a house priced between $240,000 and $320,000, depending on your financial situation, credit score, and current market conditions.
How much house can I afford for $800 a month? ›
If you have a conventional loan, $800 in monthly debt obligations and a $10,000 down payment, you can afford a home that's around $250,000 in today's interest rate environment.
