If you’re planning to take out a $250,000 mortgage, you might be wondering what you’ll pay each month. Your monthly mortgage payment will depend on a number of factors, including your interest rate, repayment term, and what type of loan you borrow.
In addition to your loan balance, you’ll also want to consider other factors that can affect the size of your loan payment, such as how much you put down up front, plus other expenses like mortgage insurance.
To get a $250,000 mortgage, follow these eight steps.
- Create a budget: Before you start the homebuying process, it’s important to determine how much house you can afford. Start by reviewing your monthly income and expenses to determine if you’ll have enough cash left over to put toward a monthly mortgage payment. You can use an online calculator to estimate your loan payments based on your loan amount, repayment term, and the APR you might qualify for.
- Check your credit: Lenders will look at your credit to determine whether you qualify for a mortgage. The higher your credit score, the lower your interest rate. You can get a free copy of your credit report at AnnualCreditReport.com. If you find any errors, like incorrect late payments or closed accounts reported as open, report them with the appropriate credit bureau to potentially boost your score.
- Get pre-approved: Getting pre-approved shows sellers that you’re a serious buyer and gives you an idea of how much you can afford to spend. The pre-approval process typically involves a hard credit check, a review of your financial records, and a brief application.
If you qualify for pre-approval, the lender will send you a pre-approval letter that’s good for 30 to 90 days. The letter will detail how much you’re eligible to borrow and what interest rate you’ll qualify for. - Compare lenders: After getting pre-approved, shop around and compare annual percentage rates (APRs) from multiple lenders. APR includes your interest rate and any fees associated with borrowing a home loan.
- Make an offer: Once you find a home within your budget, submit an offer. You can work with a real estate agent to complete this process.
- Apply for a mortgage: If the seller accepts your offer, you’ll fill out a formal mortgage application. Be prepared with documents such as recent tax returns, bank statements, and a government-issued ID. An underwriter will assess your application to determine whether to approve you for a mortgage.
- Prepare for closing: The time to close for a mortgage typically takes up to 30 days after submitting an application. This process involves signing the purchase agreement, completing a home inspection, getting an appraisal, and evaluating your application.
- Close on your loan: On closing day, you’ll attend a meeting with your loan officer to sign any remaining paperwork. You’ll sign off on the closing disclosure form, which includes details about the loan, such as your interest rate, loan amount, and any seller concessions.
You can get a $250,000 mortgage from any private lender, bank, or credit union. Eligibility requirements, rates, and repayment terms will vary depending on the lender, so it’s a good idea to shop around to make sure you find the right loan for you.
Related: Learn more about getting a home loan on Credible.com
Before you apply for a $250,000 mortgage, it’s important to be aware of all of the costs that come with it. In addition to your monthly payments, you’ll want to consider down payment, interest, and other fees like closing costs or insurance.
This is an upfront cost you’ll at closing. Making a larger down payment can help you qualify for better interest rates and lower your monthly payment.
For a conventional mortgage, you’ll need to put down 20% of the home’s purchase price to avoid having to pay private mortgage insurance (PMI). But you might be able to qualify for loan programs that require less money up front. For example, if you qualify for a mortgage from the Federal Housing Administration (FHA), you’ll only have to put down 3.5% to 10% of the purchase price.
Your interest rate is the annual cost of borrowing money, expressed as a percentage. The interest rate you’ll qualify for will be determined by your credit score, the size of your down payment, your loan amount, the length of your loan term, and the type of loan you borrow.
Here are a few ways to qualify for a lower interest rate:
When you buy a home, you’ll have to pay for all of the costs associated with the sale. Closing costs typically range from 2% to 5% of the home’s sale price. On a $250,000 mortgage, that can amount to an additional $5,000 to $12,500. These charges may be paid upfront or added to your mortgage.
Common closing costs include:
Your monthly payment on a $250,000 mortgage will largely depend on your loan amount, interest rate, and the length of your loan term. Longer repayment terms mean smaller monthly payments but more interest paid over time, while shorter terms come with higher monthly payments but less interest paid overall.
Here’s an example of what you’d pay on a $250,000 fixed-rate mortgage with a 15- or 30-year term:
| Repayment term | Interest rate | Monthly payment | Total interest | Total loan cost |
|---|---|---|---|---|
| 15 years | 6% | $2,110 | $129,736 | $379,735 |
| 30 years | 6% | $1,499 | $289,595 | $539,595 |
Before you move forward with a $250,000 mortgage, it’s important to make sure you can comfortably afford your monthly payments so you can avoid defaulting on your loan.
There are many benefits to getting a $250,000 mortgage, including:
As with any type of financing, a $250,000 mortgage comes with a few drawbacks. Here are a few downsides to keep in mind:
Related: Learn more about getting a home loan on Credible.com