Taking out a $100,000 mortgage is a big commitment — not to mention, one of your budget’s larger monthly expenses. After all, mortgage loans come with several up-front and long-term costs that can affect how much you pay each month and over the life of the loan. Common factors that impact these costs include things like the loan amount, annual percentage rate (APR), down payment, and escrow fees.

Before you get too far into the homebuying process — and especially before you sign a loan — it’s important to calculate these costs. That way, you can make sure they fit into your budget and minimize the financial risk that might come with a six-figure loan.

Several factors affect your monthly mortgage payment, including the principal amount, repayment term, APR, homeowners insurance premium and property taxes. If you also have private mortgage insurance (PMI), it will increase how much you pay each month.

Here’s how a typical monthly mortgage payment breaks down:

Here are a couple of examples of what a $100,000 mortgage loan might look like (excluding escrow costs like insurance premiums and taxes) based on mid-January 2023 mortgage rates:

Your mortgage loan might come with other associated costs as well, such as the initial down payment, appraisal fees, title insurance, and other closing costs. These are usually considered up-front expenses, meaning they don’t affect your monthly payments because they are paid entirely in the closing process.

However, some lenders will let you roll certain things — like appraisal or title fees — into the loan. This reduces how much you pay up front, while increasing your monthly payment and total interest charges.

When applying for a loan, ask your lender for an amortization schedule. Since your monthly mortgage payment goes to principal and interest over the life of the loan, the amount you pay in interest generally decreases as you pay down your mortgage balance. That gradual percentage change in interest is amortization.

Having an amortization schedule will break down that changing cost of the loan over time, showing you how much of each monthly payment will go toward the principal balance and the interest. But know that your loan term also affects that gradual change in interest.

For example, if you get a 30-year loan with 5.05% interest and a beginning $100,000 balance (your loan amount), you’ll have a monthly $540 payment ($421 in interest and $119 in principal). However, by the second month, $420 will be for the interest, and $120 will be for the principal.

A down payment is a lump sum of money you pay up front when purchasing a home (or car). The more you can put down, the less you’ll need to take out to finance your purchase. This can result in lower monthly payments and reduce how much you pay in interest over time.

For example, if you put 20% down on a $100,000 mortgage, you only need to borrow $80,000. Since your loan’s principal balance will be smaller, your monthly payments would also decrease.

Most lenders require a minimum down payment based on your credit score and the loan type. Here’s the minimum you can typically expect to put down for different home loans:

PMI is a type of insurance you may be required to get when you put less than 20% down on a conventional loan. It’s designed to protect the lender in case you default on payments.

Your lender will typically add the PMI premium to your monthly payment. However, you might be able to pay up front at the time of closing. Or you may be able to split PMI into up-front and monthly payments.

It’s possible to avoid PMI if you…

If you have PMI on your loan, here’s how to remove it:

If you’re already a member of a bank or credit union, you may consider the option of getting a $100,000 mortgage loan from them. Either way, shopping around with other financial institutions, including online lenders, helps to ensure you get the best loan for your situation. You may be able to prequalify with several lenders for a quote without affecting your credit score.

Related: Learn more about getting a home loan on Credible.com

If you’re ready to apply for a $100,000 mortgage, follow these simple steps:

1. Determine how much house you can afford. Create or update your monthly budget, listing your expenses against your expected income. Include your estimated down payment on a home and any other up-front costs. Leave some wiggle room for fluctuations in expenses (because life happens), including situations like home maintenance or repairs. Then determine how much room you have in your budget for a monthly mortgage payment.
2. Check your credit report. Your credit history affects your ability to get a loan. It also directly influences the loan term and APR. Carefully review your credit reports from the three major consumer credit bureaus  — Experian, TransUnion, and Equifax  — which you can access at AnnualCreditReport.com. 

If you find any errors, dispute them with the appropriate bureau(s) to improve your credit score.

1. Get pre-approved. A pre-approval letter from your potential mortgage lender shows potential sellers that you’re serious about buying their home. It also shows lenders how much you might qualify for. To get the letter, you’ll need to supply information about yourself and your finances (which you would verify during step five, below).
2. Compare APRs from multiple lenders. Often, lenders will send you a loan estimate once you have a pre-approval letter on hand. Compare different lenders, and compare their terms and rates. Make sure you’re comparing APRs as this is different from the interest rate and includes other fees like the origination fee.
3. Submit your mortgage application. Once you find a seller willing to accept your offer, complete the formal loan application with your chosen lender. You’ll need to provide additional documentation and information, including financial documents and bank statements. 

Your lender will review everything and either approve or reject your application, so take time to know what to do if your mortgage application is denied. You might discover that a credit bureau misreported your credit score or that housing discrimination is at play, which means contacting the credit bureau or the CFPB online to fix the issue.

1. Prepare for closing: If your lender approves your application, it will also give you the closing date. To close on the loan, you’ll need to have a cashier’s check or wire enough money to cover the down payment and any closing costs. You’ll also need to get homeowners insurance before the closing date.
2. Get the keys: At closing, sign the necessary paperwork and make your payments. Once the funds go through, you’ll receive the keys to your new home.

You might have your eye on homes that would require a $100,000 mortgage. No matter how big — or small — of a loan you’re getting, however, fully understand the costs associated with it. Before applying for a mortgage loan, ask yourself:

Remember, how much you pay each month depends on several factors, including the loan term, down payment, and interest rate. A longer loan term and higher interest rate can also affect how much you pay in the long run.

Say, for example, you take out a $100,000 mortgage with a 30-year term and 5.25% APR. Without accounting for your down payment and other costs like PMI and property taxes, your total interest charges would be  $99,240, making the total cost of the loan $199,240.

On the other hand, say you take out a $100,000 home loan with a 15-year term and 6.07% APR. Your total interest charges would be $52,576, making the total cost of your loan $152,576.

Now that you know how the cost of your mortgage can vary, you’re better equipped to shop around for a home that’s affordable.

Related: Learn more about getting a home loan on Credible.com