In addition to your monthly mortgage payment, you’ll want to consider several other factors before applying for a $350,000 mortgage. Let’s break them down one-by-one. Depending on the kind of mortgage loan you sign up for, you may be required to make a down payment on your home. In any case, you’ll have a more manageable monthly mortgage payment the more money you put down upfront. That’s because your principal mortgage balance starting out will be less than if you put no money or less money down. On a conventional loan, which you can sometimes get with a down payment of as little as 3% of the purchase price, it’s best if you can put down no less than 20%. That way, you can avoid paying private mortgage insurance (PMI) and having extra PMI fees included as part of your monthly mortgage bill. Take into consideration your current savings and how much of that you’re planning to contribute to a down payment. Down Payment
Closing Costs
Closing costs are another one-time expense you need to plan for when taking out a mortgage. In most cases, you can expect to be required to pay 3% – 6% of the loan amount in closing costs. That comes out to somewhere in the $10,500 – $21,000 range on a $350K mortgage.
Closing costs often include the following fees, although not all home purchase transactions have the same closing costs:
- An application fee
- An attorney’s fee
- A closing fee
- A courier fee
- A credit reporting fee
- A homeowners association transfer fee
- A loan origination fee
- An appraisal fee
- Escrow fees
Loan Term
As we briefly touched on above, you’ll need to decide on a loan term for your mortgage. You can choose between the common 30-year and 15-year term options, or you may be able to go with a far less common 20-year term.
If you have the means to pay more per month, you may be best opting for a 15-year loan, while a 30-year loan is likely the best option if you can’t afford to make higher monthly payments at the time of purchase.
Adjustable-Rate Vs. Fixed-Rate Mortgage
One of the most important decisions you’ll make concerning your loan is whether to go with a fixed-rate or an adjustable-rate mortgage. With the latter option, your interest rate will be set for a period of several years – known as the fixed period – after which it can change every year or so based on fluctuations in market rates.
With a fixed-rate mortgage, your interest rate will never change for as long as you owe money on the home. That said, the amount of your monthly mortgage payment could still go up or down with any changes in the amount you owe in property taxes and homeowners insurance from year to year. Homeowners like fixed-rate mortgages for their predictability relative to adjustable-rate loans, but the big upside of an adjustable-rate mortgage is that you can typically secure a lower interest rate for the first few years.
Knowing the differences between these mortgages is key to understanding your monthly payment on your $350,000 mortgage and how it may change over time.
Qualification Requirements
To be approved for a $350,000 mortgage, you’ll need to meet your lender’s qualification requirements. Typical requirements for a conventional loan include not just a minimum 3% down payment, as mentioned earlier, but also a credit score of at least 620, a maximum debt-to-income ratio (DTI) of 50%, and an income that can support both your monthly mortgage payment and other life expenses and bills.
