15-year mortgage

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A $450K mortgage payment is between $3,000 and $4,000 per month in the current interest-rate environment, depending on your loan type and term. This amount, however, does not include other variables that affect your payment, such as property taxes and insurance. Here’s the lowdown on what you can expect.

Cost of a $450,000 Mortgage

A $450K mortgage payment is primarily influenced by your loan term and interest rate. A 30-year loan at 7% interest would result in a monthly cost of $2,993 (not including taxes and insurance). But a 15-year loan at the same interest rate would have monthly payments of $4,044.
💡 Quick Tip: SoFi’s Lock and Look + feature allows you to lock in a low mortgage financing rate for 90 days while you search for the perfect place to call home.

Monthly Payments for a $450,000 Mortgage

The amount you pay each month for a $450,000 mortgage payment is going to be somewhere between $2,993 and $4,044. However, keep in mind that there are a few variables that affect your monthly payment. These include:

•   Interest rate

•   Fixed or variable interest rate

•   Length of repayment period (15, 20, or 30 years)

•   Mortgage insurance

•   Property taxes

•   Property insurance

Another thing to consider are homeowners association (HOA) fees. Although they are paid directly to the HOA association and shouldn’t affect your monthly mortgage payment, these fees are an additional living expense.

If you’re a first-time homebuyer, it’s important to understand the true cost of owning a home because your monthly payment is more complicated than simply the amount you borrow. Housing costs and property taxes, for example, vary based on location. If you’re open to where you live, you may want to compare the cost of living by state. The best affordable places to live in the U.S. may pique your interest!

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Where to Get a $450,000 Mortgage

Banks, credit unions, and online lenders can all provide you with a $450,000 mortgage. Make sure you shop around and compare lenders to get the lowest interest rate. As you apply, you’ll receive loan estimates that show the cost of a loan. While the annual percentage rate (APR) is certainly important, also compare expenses such as the loan origination fee and mortgage insurance.

What to Consider Before Applying for a $450,000 Mortgage

Before applying for a $450,000 mortgage, consider the cost difference between a shorter loan repayment period and a longer loan repayment period. For a 30-year mortgage with a 7% interest rate, the total interest paid during the life of the loan would be $627,791.

For a 15-year mortgage with the same interest rate, you would have a higher monthly payment, but the total amount you would pay in interest would be more than halved: just $278,050. For an extra $1,050 each month, a 15-year loan would save $349,739 in interest compared to a 30-year loan.

If you can’t afford a 15-year mortgage now, just remember that you can always do a mortgage refinance in the future.

$450,000 mortgage with a term of 30 years and a 7% interest rate:

Year Beginning Balance Monthly Payment Total Interest Paid Total Principal Paid Remaining Balance
1 $450,000 $2,993.86 $31,355.19 $4,571.14 $445,428.86
2 $445,428.86 $2,993.86 $31,024.74 $4,901.59 $440,527.26
3 $440,527.26 $2,993.86 $30,670.41 $5,255.93 $435,271.33
4 $435,271.33 $2,993.86 $30,290.45 $5,635.88 $429,635.45
5 $429,635.45 $2,993.86 $29,883.04 $6,043.30 $423,592.15
6 $423,592.15 $2,993.86 $29,446.17 $6,480.17 $417,111.98
7 $417,111.98 $2,993.86 $28,977.71 $6,948.62 $410,163.36
8 $410,163.36 $2,993.86 $28,475.40 $7,450.94 $402,712.43
9 $402,712.43 $2,993.86 $27,936.77 $7,989.57 $394,722.86
10 $394,722.86 $2,993.86 $27,359.20 $8,567.13 $386,155.73
11 $386,155.73 $2,993.86 $26,739.88 $9,186.45 $376,969.27
12 $376,969.27 $2,993.86 $26,075.79 $9,850.54 $367,118.73
13 $367,118.73 $2,993.86 $25,363.70 $10,562.64 $356,556.09
14 $356,556.09 $2,993.86 $24,600.12 $11,326.21 $345,229.88
15 $345,229.88 $2,993.86 $23,781.35 $12,144.98 $333,084.90
16 $333,084.90 $2,993.86 $22,903.39 $13,022.95 $320,061.95
17 $320,061.95 $2,993.86 $21,961.96 $13,964.38 $306,097.58
18 $306,097.58 $2,993.86 $20,952.47 $14,973.86 $291,123.71
19 $291,123.71 $2,993.86 $19,870.01 $16,056.32 $275,067.39
20 $275,067.39 $2,993.86 $18,709.30 $17,217.04 $257,850.35
21 $257,850.35 $2,993.86 $17,464.68 $18,461.66 $239,388.69
22 $239,388.69 $2,993.86 $16,130.08 $19,796.25 $219,592.44
23 $219,592.44 $2,993.86 $14,699.01 $21,227.33 $198,365.12
24 $198,365.12 $2,993.86 $13,164.48 $22,761.85 $175,603.27
25 $175,603.27 $2,993.86 $11,519.03 $24,407.31 $151,195.96
26 $151,195.96 $2,993.86 $9,754.62 $26,171.71 $125,024.25
27 $125,024.25 $2,993.86 $7,862.67 $28,063.67 $96,960.58
28 $96,960.58 $2,993.86 $5,833.94 $30,092.39 $66,868.19
29 $66,868.19 $2,993.86 $3,658.56 $32,267.77 $34,600.41
30 $34,600.41 $2,993.86 $1,325.92 $34,600.41 $0

$450,000 mortgage with a term of 15 years and 7% interest rate:

Year Beginning Balance Monthly Payment Total Interest Paid Total Principal Paid Remaining Balance
1 $450,000 $4,044.73 $30,942.64 $17,594.09 $432,405.91
2 $432,405.91 $4,044.73 $29,670.76 $18,865.97 $413,539.94
3 $413,539.94 $4,044.73 $28,306.94 $20,229.79 $393,310.15
4 $393,310.15 $4,044.73 $26,844.52 $21,692.20 $371,617.94
5 $371,617.94 $4,044.73 $25,276.39 $23,260.34 $348,357.61
6 $348,357.61 $4,044.73 $23,594.90 $24,941.83 $323,415.78
7 $323,415.78 $4,044.73 $21,791.85 $26,744.87 $296,670.91
8 $296,670.91 $4,044.73 $19,858.46 $28,678.26 $267,992.64
9 $267,992.64 $4,044.73 $17,785.31 $30,751.42 $237,241.23
10 $237,241.23 $4,044.73 $15,562.29 $32,974.44 $204,266.79
11 $204,266.79 $4,044.73 $13,178.56 $35,358.16 $168,908.62
12 $168,908.62 $4,044.73 $10,622.52 $37,914.21 $130,994.41
13 $130,994.41 $4,044.73 $7,881.70 $40,655.03 $76,144.79
14 $76,144.79 $4,044.73 $4,942.74 $43,593.99 $31,524.68
15 $31,524.68 $4,044.73 $1,791.33 $46,745.40 $0

It’s important to understand how costs vary between the different types of mortgage loans. A mortgage calculator can help you get a quick idea of what to expect before you commit to a home mortgage loan.

How to Get a $450,000 Mortgage

To get a $450,000 mortgage, you need a strong credit score, a steady source of income, and a low debt-to-income ratio. Other tips to qualify for a mortgage include things like saving up for a higher down payment and submitting all of the appropriate paperwork to your lender in a timely manner. If you’re just starting out on your home buying journey, a home loan help center may be a good resource.
💡 Quick Tip: Generally, the lower your debt-to-income ratio, the better loan terms you’ll be offered. One way to improve your ratio is to increase your income (hello, side hustle!). Another way is to consolidate your debt and lower your monthly debt payments.

The Takeaway

Payment on a $450,000 mortgage is influenced by a few different variables, such as your loan term and interest rate. Other factors that come into play include mortgage insurance, property taxes, and property insurance. A higher down payment and a stronger credit score may help lower your monthly payment.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% – 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It’s online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

How much is $450K mortgage a month?

A $450,000 mortgage should cost you around $3,000 to $4,000. Just remember to also include property taxes and insurance in your calculations.

How much income is required for $450,000 mortgage?

You probably need to earn around $140,000 a year to afford a $450,000 mortgage. A general guideline is that all of your housing costs should be at or below 30% of your gross income. Assuming you opt for a 30-year loan, your mortgage payment, property tax, and insurance cost would total around $3,200 per month. Factor in a budget for utilities and repairs and your total annual cost would be $42,000 — that’s 30% of $140,000.

How much is a down payment on a $450,000 mortgage?

A conventional loan requires a down payment of at least 3%. Therefore, your down payment should be, at minimum, $13,500. A down payment of 20% ($113,000 on a property costing $563,000) would allow you to skip paying the additional cost of mortgage insurance.

Can I afford a $450K house with a $70K salary?

It’s not likely. Assuming you choose a 30-year loan, your monthly payment would be around $3,000, which would be more than 50% of your gross income — well over the 30% that is considered the maximum amount you should spend on housing. The only way to make it work would be to have a large down payment (more than $150,000) to lower the amount you would have to borrow and thus your monthly payments.

Photo credit: iStock/AntonioGuillem

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

+Lock and Look program: Terms and conditions apply. Applies to conventional purchase loans only. Rate will lock for 91 calendar days at the time of preapproval. An executed purchase contract is required within 60 days of your initial rate lock. If current market pricing improves by 0.25 percentage points or more from the original locked rate, you may request your loan officer to review your loan application to determine if you qualify for a one-time float down. SoFi reserves the right to change or terminate this offer at any time with or without notice to you.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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Source: sofi.com

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A $150,000 mortgage will cost a total of $341,318 over the lifetime of the loan, assuming an interest rate of 6.5% and a 30-year term. It might be tempting to think that a $150,000 mortgage will cost…well, $150,000. But lenders need to earn a living for their services and mortgage loans come with interest.

What’s the True Cost of a $150,000 Mortgage?

The specific price you will pay to borrow $150,000 depends on your interest rate — which, in turn, is based on a wide range of factors including your credit score, income stability, and much more. Here’s what you need to know to get an estimate of how much a $150,000 home mortgage loan might cost in your specific circumstances.
💡 Quick Tip: If you refinance your mortgage and shorten your loan term, you could save a substantial amount in interest over the lifetime of the loan.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Where Do You Get a $150,000 Mortgage?

Good news: There are many banks and institutions that offer $150,000 mortgages. For 2024, the maximum amount for most conventional loans is more than $750,000, so the loan you’re considering is well within reach. To see how your salary, debts, and down payment savings affect how much home you can afford, use a home affordability calculator.

However, it’s important to understand that even a $150,000 mortgage may cost far more than the sticker price after interest and associated fees. For instance, let’s say you purchase a $200,000 home with a 25% down payment and a $150,000 mortgage. If your interest rate is 7% and your loan term is 30 years, the total amount you’d pay over that time is $359,263.35 — which means you’d actually pay more than the home price ($209,263.35) in interest alone. (And that’s before closing costs, home insurance, property taxes, or mortgage insurance.)

At prices like that, it may seem like taking out a mortgage at all is a bad deal. Fortunately, property has a tendency to increase in value (or appreciate) over time, which helps offset the overall cost of interest. (Of course, nothing is guaranteed.)

Keep in mind that you can potentially lower the interest rate you qualify for by lowering your debt-to-income (DTI) ratio, improving your credit score, or increasing your cash flow by getting a better-paying job. Even a small decrease in interest can have a big effect over the lifetime of a loan. In our example above, with all else being equal, you’d pay only $139,883.68 in interest if your rate were 5% instead of 7% — a savings of nearly $70,000!

Recommended: The Best Affordable Places to Live in the U.S.

Monthly Payments for a $150,000 Mortgage

When you take out a $150,000 mortgage, you’ll repay it over time in monthly installments — of a fixed amount, if you have a fixed mortgage, or amounts that can change if you take out a variable rate loan.

Your monthly $150K mortgage payment includes both principal (the amount you borrowed) and interest (the amount you’re being charged), and may also wrap in your property taxes, homeowners insurance, and mortgage insurance if applicable. (You’ll only need to pay mortgage insurance if your down payment is less than 20%.)

But there is another caveat here that some first-time homebuyers don’t know about. Even if your mortgage payments are fixed each month, the proportion of how much principal you’re paying to how much interest you’re paying does change over time — a process known as the amortization of the loan. It’s a big word, but its bottom line is simple: Earlier on in the loan’s life, you’re likely paying more interest than principal, which increases the amount of money the bank earns overall. Later on in the loan, you’ll usually pay more principal than interest.

What to Consider Before Applying for a $150,000 Mortgage

Amortization is important to understand because it can affect your future financial decisions. For example, if you’re not planning on staying in your house for many years, you may find you have less equity in your home than you originally imagined by the time you’re ready to sell — because the bulk of your mortgage payments thus far have been going toward interest. It might also affect when it makes sense to refinance your mortgage.

Most lenders make it easy to make larger payments or additional payments against the principal you owe so that you can chip away at your debt total faster, but be sure to double-check that your lender doesn’t have early repayment penalties.

Of course, there are different types of home loans. Here are some sample amortization schedules for two $150,000 home loans. (You can also build your own based on your specific details with a mortgage calculator or an amortization calculator online.)

Amortization Schedule, 30-year, 7% Fixed

Years Since Purchase Beginning Balance Monthly Payment Total Interest Paid Total Principal Paid Remaining Balance
1 $150,000 $997.95 $10,451.73 $1,523.71 $148,476.29
3 $146,842.42 $997.95 $10,223.47 $1,751.98 $145,090.44
5 $143,211.82 $997.95 $9,961.01 $2,014.43 $141,197.38
10 $131,574.29 $997.95 $9,119.73 $2,855.71 $128,718.58
15 $115,076.63 $997.95 $7,927.12 $4,048.33 $111,028.30
20 $91,689.13 $997.95 $6,236.43 $5,739.01 $85,950.12
30 $11,533.47 $997.95 $441.97 $11,975.44 $0.00

Notice that, for more than the first half of the loan’s lifetime, you’ll pay substantially more interest than principal each year — even though your mortgage payments remain fixed in amount.

Amortization Schedule, 15-year, 7% Fixed

Years Since Purchase Beginning Balance Monthly Payment Total Interest Paid Total Principal Paid Remaining Balance
1 $150,000 $1,348.24 $10,314.21 $5,864.70 $144,135.30
3 $137,846.65 $1,348.24 $9,435.65 $6,743.26 $131,103.38
5 $123,872.65 $1,348.24 $8,425.46 $7,753.45 $116,119.20
7 $107,805.26 $1,348.24 $7,263.95 $8,914.96 $98,890.30
10 $79,080.41 $1,348.24 $5,187.43 $10,991.48 $68,088.93
12 $56,302.87 $1,348.24 $3,540.84 $12,638.07 $43,664.80
15 $15,581.80 $1,348.24 $597.11 $15,581.80 $0.00

While a shorter loan term may help you build equity in your home more quickly, it comes at the cost of a higher monthly payment.

How to Get a $150,000 Mortgage

To apply for a $150,000 mortgage, you can search for providers online or go into a local brick-and-mortar bank or credit union you trust. You’ll need to provide a variety of information to qualify for the loan, including your employment history, income level, credit score, debt level, and more.

The higher your credit score, lower your debt, and more robust your cash flow, the more likely you are to qualify for a $150,000 mortgage — and, ideally, one at the lowest possible interest rate. That said, mortgage interest rates are also subject to market influences and fluctuations, and sometimes rates are simply higher than others overall.
💡 Quick Tip: To see a house in person, particularly in a tight or expensive market, you may need to show the real estate agent proof that you’re preapproved for a mortgage. SoFi’s online application makes the process simple.

The Takeaway

A $150,000 mortgage can actually cost far more than $150,000. Depending on your interest rate and your loan term, you may spend more than you borrowed in principal in the first place on interest, and you’ll likely pay a higher proportional amount of interest per monthly payment for about the first half of your loan’s lifetime.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% – 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It’s online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

How much is $150K mortgage a month?

A 30-year, $150,000 mortgage at a 7% fixed interest rate will be about $998 per month (not including property taxes or mortgage interest), while a 15-year mortgage at the same rate would cost about $1,348 monthly. The exact monthly payment you owe on a $150,000 mortgage will vary depending on factors like your interest rate and what other fees, like mortgage insurance, are rolled into the bill.

How much income is required for a $150,000 mortgage?

Those who earn about $55,000 or more per year may be more likely to qualify for a $150,000 mortgage than those who earn less. Although your income is an important marker for lenders, it’s far from the only one — and even people who earn a lot of money may not qualify for a mortgage if they have a high debt total or a poor credit score. (Still, the best way to learn whether or not you qualify is to ask your lender.)

How much is a downpayment on a $150,000 mortgage?

To avoid paying mortgage insurance, you’d want to put down 20% of the home’s purchase price, which if you are borrowing $150,000 would be $50,000 for a home priced at $200,000. Some lenders allow you to put down as little as 3.5% of the home’s price. So if you had a $150,000 mortgage and put down 3.5%, your down payment would be $5,440 and the home price would be $155,440. (Keep in mind these figures do not include closing costs.)

Can I afford a $150K house with $70K salary?

Yes, as long as you don’t have a lot of other debt, you can probably afford a $150,000 home if you’re making $70,000 a year. There’s a basic rule of thumb to spend less than a third of your gross income on your housing. With an income of $70,000 per year, you’re making about $5,833.33 per month before taxes — and a third of that figure is $1,925. A $150,000 mortgage might have a monthly payment of as little as $998 per month, even with a 7% interest rate, so it should be affordable for you as long as you don’t have other substantial debts.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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Source: sofi.com

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Purchasing a home can be a daunting task, especially for first-time homebuyers. There is often a great deal of pressure to find a home that meets your preferences and is in good condition, as well as obtaining approval for a mortgage. Even those with experience in real estate may feel overwhelmed by the process.

Plus, even if you find the home of your dreams, you still have to put in an offer and hope that it’s accepted with no competition from other buyers.

Luckily, there’s a way to not only stand out from other home buyers, but also to expedite your mortgage approval process. By getting preapproved for a mortgage before you even put in an offer on a home, you can significantly increase your chances of having your offer selected.

The Basics of Mortgage Preapproval

A mortgage preapproval refers to a letter from your lender indicating that you meet the standards for a mortgage loan within a certain price range.

The lender has thoroughly reviewed your credit history, income, and other financial indicators and put them through the automated underwriting system. Mortgage preapprovals are typically valid between 60 and 90 days.

Why Mortgage Preapproval Matters for Homebuyers

There are a couple of benefits to getting preapproved in advance of viewing houses. One of the most significant factors is that it strengthens your offer when bidding on a home that you love.

Many deals fall through because of financing issues, even after the seller accepts an offer. If you have a preapproval letter to submit as well, the seller knows that the deal is more likely to close by accepting your offer than someone else’s.

Furthermore, real estate agents typically want to see that you’ve been preapproved before they show you houses. They don’t want to waste their time showing clients houses if they cannot buy a home.

Mortgage Preapproval Letter

Getting a mortgage preapproval letter also gives you a chance to see how large of a home loan you’ll be approved for, helping to narrow down your home search to the suitable price range.

You’ll also find out what types of home loans you qualify for, whether it be a conventional, FHA, VA, or other type of mortgage. Some of these loans have certain restrictions on the type of property you can purchase and what condition it must be in. Some also require a certain down payment percentage.

The content of a preapproval letter may vary depending on the lender. Generally, the letter includes details such as the purchase price, loan program, interest rate, origination fees, loan amount, down payment amount, expiration date, and property address. This letter is typically included with an offer to purchase a new home.

Private Mortgage Insurance

If your down payment is less than 20%, you’ll likely have to pay private mortgage insurance (PMI), which is also based on the loan amount. Getting preapproved helps you financially prepare for the full cost of your new home and your monthly mortgage payment.

Check Out Our Top Picks for 2024:

Best Mortgage Lenders

Once you determine your target loan amount, you’ll know what your monthly principal, interest, and mortgage payments will look like. When you know that, you can then look at individual properties to determine how much property tax and even homeowner’s insurance you’ll need to tack on to each month’s payment.

You need to consider all of your fees before finalizing your maximum home price. Otherwise, you could be unpleasantly surprised when you get your first mortgage bill.

Getting Ready for Mortgage Preapproval

Before you talk to a lender about getting preapproved for a mortgage, the best thing to do is to check both your credit report and credit score.

Get Your Free Credit Report

You can access your credit reports from each of the three credit bureaus for free once every twelve months. So get started a few months before you’ll be house hunting to give yourself time to address any issues.

Dispute Negative Inaccuracies

You might have outdated information lingering on your credit report or even incorrect items. The dispute process can take some time. You want to make sure your credit score is as strong as possible. That way, you can get approved and get the best mortgage rates possible when the time comes.

Check Your Credit Score

There are a couple of free websites like Credit Karma that provide you with access to your credit score. It might not be the same credit score your lender will use, but it still lets you know what ballpark you’re in. If your credit score is lower than you’d like to see, you have time to make some quick fixes.

For example, you can get a higher credit card limit to decrease your credit utilization ratio or pay down extra debt to lower your debt-to-income ratio. A little planning can help strengthen your chances for preapproval before you even contact a lender.

How to Get Preapproved for a Mortgage

When you’re ready to start the mortgage preapproval process, the loan officer will ask you for several pieces of information. You will need to provide income tax returns from the past two years, pay stubs to verify your employment and gross monthly income, and bank statements.

You’ll also have to provide your Social Security number and sign a form giving the lender permission to perform a hard inquiry on your credit report.

At that time, the lender will also perform a credit check and review your credit score to use in the evaluation process. Because underwriting systems are now automated, you can get preapproved in a matter of minutes.

Possible Outcomes

When the underwriting process is completed, you’ll either receive one of four responses.

Here’s what they are and what they mean:

  • Approved: your initial mortgage preapproval has gone through with no conditions.
  • Approved with conditions: you must complete additional steps before getting approved (for example, providing extra income verification to the lender.)
  • Suspended: you must answer additional questions before the underwriter determines whether you’re approved.
  • Declined: your application did not get approved.

Many mortgage lenders state that it’s actually quite rare to be preapproved for a mortgage with no conditions on your first attempt. So, don’t be disheartened if this happens to you—you’re in good company!

Even a suspended application isn’t the end of the road. And if the lender declines your mortgage preapproval, make sure to ask them why so that you can take targeted steps to improve the weak areas in your application.

Mortgage Prequalification vs. Preapproval: Clarifying the Differences

When you first contact a lender about qualifying for a mortgage, you’ll probably discuss your basic financial picture to help you determine how much of a loan you’re likely to get approved for.

Mortgage Prequalification

This is referred to as prequalification for a home loan. The mortgage lender doesn’t access your credit report or request financial documentation. Instead, they give you an idea of loans you’d qualify for based on the information you provide.

If you provide false information, your mortgage application will definitely fall apart in the underwriting process, so it’s important to be honest and as accurate as possible. Otherwise, it’s a waste of your time. Getting prequalified is a smart move to inform yourself of your mortgage options, but it’s not strong enough to submit with an offer on a house.

Mortgage Preapproval

On the other hand, getting preapproved for a mortgage prove to sellers that you’ve already been through the preliminary underwriting process, and your financing is likely to go through all the way.

In this instance, you submit all necessary financial documentation to your lender. Not only does it strengthen your offer when you find a home you like, but it also speeds up the next steps in the mortgage process so that you can close more quickly.

Choosing the Right Mortgage Lender

Getting a prequalification before a preapproval may seem like an unnecessary step, but it’s a great way to interview the lender as much as they’re interviewing you.

At the end of the day, mortgage lenders compete for your business, so don’t just choose the first one who gives you a prequalification or preapproval. There are several factors to consider before you make this critical decision. You should speak to multiple lenders and compare interest rates and loan options to find the best one for your financial situation.

Comparing Interest Rates

Start with an interest rate comparison. You should be able to get quotes based on your basic financial information without the lender performing a hard pull on your credit report.

Furthermore, consider how much money the lender says you can afford. They don’t know how much your other bills are or how much you’re comfortable spending.

If they try to pressure you into a loan amount that seems like it would be too expensive based on the monthly payments, they may not have your best interests at heart. A good lender wants to make sure you can afford your payments every month and is transparent about costs beyond your principal and interest.

Mortgage Rate Lock Float Down

You can also ask lenders what kind of perks they offer. For example, some give their clients one free float down before closing. This means, if interest rates have dropped since you locked in your rate, you can get that lower rate without having to pay any additional fees or points.

Others offer discounts on closing costs to clients in public service professions, such as teachers, police officers, and firefighters. Even if a particular lender doesn’t offer any of these services, you can reference another one that does to negotiate your own special deal.

Mortgage Preapproval Checklist

  • Check your credit report and credit score.
  • Find a trustworthy lender.
  • Get prequalified to find out what types of loans you’re eligible for.
  • Gather financial documentation, such as pay stubs, bank statements, W-2s, and income tax returns from the last two years.
  • Apply for a preapproval letter to seriously begin your home search.

Frequently Asked Questions

What factors are considered for mortgage preapproval?

Lenders will take a look at your credit score and verify your employment and income. They will also consider your debt-to-income ratio (DTI), which is the percentage of your monthly income that goes towards paying off debts.

To get a mortgage, it is generally advisable to have a DTI of 50% or lower. The required DTI for a loan may vary depending on the type of loan you are seeking.

Why should I get preapproved by more than one lender?

By applying to multiple lenders, you can compare interest rates and fees to find the deal with the most favorable terms. This can save you a lot of money over the life of the loan.

To find a mortgage that works for your financial situation, you should do your research and weigh all of your options.

Can I get preapproved for a mortgage online?

Yes, it is possible to get preapproved for a mortgage online. Many lenders allow you to provide your financial information and documentation through the lender’s website or over the phone.

You will typically need to provide the lender with information such as your monthly income, monthly debts, and credit history. After reviewing this information, the lender will determine how much they are willing to lend you and provide you with a preapproval letter.

Does mortgage preapproval guarantee a loan?

No, getting preapproved for a mortgage does not guarantee that you will receive a loan. The lender will still need to evaluate the property you are interested in buying and your financial information at the time of the loan application.

How much house can I afford?

There are several factors to consider when determining how much house you can afford, including your income, debts, down payment, and the type of mortgage you can qualify for. A general rule of thumb is to aim for a home that costs no more than three to five times your annual household income.

To calculate how much you can afford, you’ll need to consider your debt-to-income ratio (DTI). This is a measure of how much of your income goes towards paying off debts. Lenders typically look for a DTI of 50% or lower when determining how much you can borrow.

You’ll also need to consider your down payment and the type of mortgage you qualify for. A larger down payment can help you qualify for a better mortgage rate, and a shorter loan term (such as a 15-year mortgage) can also lower your monthly payments.

It’s a good idea to work with a lender to get a more detailed assessment of how much you can afford. They can help you understand your options and guide you towards a mortgage that works for your budget.

Can I get preapproved for a mortgage with bad credit?

It may be more difficult to get mortgage preapproval with bad credit, but it is not impossible. Some lenders may require a higher down payment or charge a higher interest rate for borrowers with lower credit scores.

Source: crediful.com

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Published 10:23 a.m. UTC Jan. 26, 2024

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The average rate on a 30-year fixed mortgage is 7.23%, and on a 15-year fixed-rate mortgage, it’s 6.43%. The average rate on a 30-year jumbo mortgage is 7.24%.

*Data accurate as of January 25, 2024, the latest data available.

30-year fixed mortgage rates

The average mortgage rate for 30-year fixed loans rose today to 7.23% from 7.17% last week, according to data from Curinos. This is up from last month’s 7.15% and up from a year ago when it was 5.69%.

At the current 30-year fixed rate, you’ll pay about $686 each month for every $100,000 you borrow — up from about $688 last week.

Ready to buy? Compare the best mortgage lenders

15-year fixed mortgage rates

The mortgage rates for 15-year fixed loans rose today to 6.43% from 6.42% last week. Today’s rate is up from last month’s 6.30% and up from a year ago when it was 4.96%.

At the current 15-year fixed rate, you’ll pay about $870 each month for every $100,000 you borrow, up from about $869 last week.

30-year jumbo mortgage rates

The mortgage rates for 30-year jumbo loans rose today to 7.24% from 7.21% last week. This is up from last month’s 7.09% and up from 4.61% last year.

At the current 30-year jumbo rate, you’ll pay around $685 each month for every $100,000 you borrow, down from about $686 last week.

Methodology

To determine average mortgage rates, Curinos uses a standardized set of parameters. For conventional mortgages, the calculations are based on an owner-occupied, one-unit property with a loan amount of $350,000. For jumbo mortgages, the loan amount is $766,550. These calculations assume an 80% loan-to-value ratio, a credit score of 740 or higher and a 60-day lock period.

Frequently asked questions (FAQs)

Mortgage rates are determined by a variety of factors, including the overall economy, inflation and the actions of the Federal Reserve. Mortgage lenders then set their loan rates based on these economic elements.

The rate you’re offered on a mortgage will also depend not only on the lender but also on your credit score, income, debt-to-income (DTI) ratio and other parts of your financial profile.

If you opt for a rate lock, you can typically do so for 30 to 60 days, depending on the lender. In some cases, you might be able to lock in your rate for up to 120 days.

Keep in mind that while some lenders allow you to lock in a mortgage rate for free, you’ll likely have to pay a fee for a longer lock period. This fee generally ranges from 0.25% to 0.5% of your loan amount. You could also be charged a fee if you want to extend the lock period — usually 0.375% of the loan amount.

There are several strategies that could help you qualify for the best mortgage rate, such as:

  • Checking your credit: When you apply for a mortgage, the lender will review your credit to determine your creditworthiness as well as your interest rate. In general, the higher your credit score, the lower your rate will be. So before you apply, it’s a good idea to check your credit to see where you stand. If you find any errors in your credit report, dispute them with the appropriate credit bureau to potentially boost your score.
  • Comparing lenders: Taking the time to shop around and compare your options from as many lenders as possible can help you find the best deal. In addition to rates, make sure to also consider each lender’s terms, fees and eligibility requirements.
  • Improving your credit score: If you have less-than-perfect credit and can wait to apply for a mortgage, it could be worth working to improve your credit beforehand to qualify for better rates in the future. Some possible ways to boost your credit include paying all of your bills on time and aiming to keep your credit utilization (the amount of credit you’ve used compared to your credit limits) on credit cards and lines of credit at 30% or less.
  • Reducing debt: Paying down debt could help lower your DTI ratio, which is how much you owe in monthly debt payments compared to your income. Having a lower DTI ratio can make you look like less of a risk in the eyes of a lender, which can result in a lower rate.
  • Choosing a shorter repayment term: Lenders typically offer lower rates to borrowers who opt for shorter terms. For example, you’ll likely get a lower rate on a 15-year mortgage compared to a 30-year loan.

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Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.

Blueprint has an advertiser disclosure policy. The opinions, analyses, reviews or recommendations expressed in this article are those of the Blueprint editorial staff alone. Blueprint adheres to strict editorial integrity standards. The information is accurate as of the publish date, but always check the provider’s website for the most current information.

Jamie Young is Lead Editor of loans and mortgages at USA TODAY Blueprint. She has been writing and editing professionally for 12 years. Previously, she worked for Forbes Advisor, Credible, LendingTree, Student Loan Hero, and GOBankingRates. Her work has also appeared on some of the best-known media outlets including Yahoo, Fox Business, Time, CBS News, AOL, MSN, and more. Jamie is passionate about finance, technology, and the Oxford comma. In her free time, she likes to game, play with her two crazy cats (Detective Snoop and his girl Friday), and try to keep up with her ever-growing plant collection.

Megan Horner is editorial director at USA TODAY Blueprint. She has over 10 years of experience in online publishing, mostly focused on credit cards and banking. Previously, she was the head of publishing at Finder.com where she led the team to publish personal finance content on credit cards, banking, loans, mortgages and more. Prior to that, she was an editor at Credit Karma. Megan has been featured in CreditCards.com, American Banker, Lifehacker and news broadcasts across the country. She has a bachelor’s degree in English and editing.

Ashley is a USA TODAY Blueprint loans and mortgages deputy editor who has worked in the online finance space since 2017. She’s passionate about creating helpful content that makes complicated financial topics easy to understand. She has previously worked at Forbes Advisor, Credible, LendingTree and and Student Loan Hero. Her work has appeared on Fox Business and Yahoo. Ashley is also an artist and massive horror fan who had her short story “The Box” produced by the award-winning NoSleep Podcast. In her free time, you can find her drawing, scaring herself with spooky stories, playing video games and chasing her black cat Salem.

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Source: usatoday.com