How much does a $200,000 mortgage cost?

The median U.S. home costs around $430,000, according to research by Redfin, so if you only need to borrow $200,000 to buy a home, you’ll be the envy of many. Still, a $200,000 mortgage payment is no small commitment. The loan term you choose and the interest rate you qualify for, along with other factors, will affect your monthly payment.

Monthly payments for a $200,000 mortgage

Every mortgage payment covers principal and interest. Additional costs might be included, too — or you might need to budget for them separately. Here’s a quick rundown of each monthly expense:

• Principal: The money you borrow to buy a home. It’s the purchase price minus your down payment, plus any closing costs you finance.
• Interest: The money you pay to borrow the principal. With a fixed-rate mortgage, your monthly payment is constant throughout your loan term. The proportion of your payment that goes toward principal increases each month, while the proportion that goes toward interest decreases.
• Escrow: If your lender requires you to have an escrow account to manage your homeowners insurance and property taxes, you’ll divide the annual bills by 12 and add that amount to your monthly payment. Your lender will pay your bills from your escrow account when they’re due. If you won’t have an escrow account, set this money aside in a savings account to pay these bills yourself.
• Insurance: For FHA loans and conventional loans with a down payment of less than 20%, you’ll typically need to pay for mortgage insurance.
• Association dues: Owning a home in a homeowners association (HOA) comes with additional monthly, quarterly, or annual fees. HOA dues are separate from your mortgage payment but they’re an important ongoing cost to factor into your budget.

Where to get a $200,000 mortgage

Shopping around and getting three to five offers is one of the most effective ways to get a lower mortgage payment and save money on closing costs, according to Freddie Mac. When you’re looking for a loan, it can be helpful to understand that mortgage lenders fall into three broad categories. 

Retail lenders

A retail lender is one you apply with directly. Some have a branch you can visit in person, while others are only online. Banks, credit unions, and digital mortgage companies can all be retail lenders. They’ll offer conventional loans and possibly also FHA, VA, and jumbo loans. 

When you apply with a retail lender, you’ll either get approved or rejected, and that’s the end of the line. Don’t take one lender’s decision as gospel about your qualifications as a borrower. Lenders vary in how they evaluate applicant risk and how competitive their offerings are.

Mortgage brokers

Mortgage brokers have relationships with multiple wholesale lenders. If you want help figuring out where to get a home loan, a broker can take your application and submit it to the lenders they think will give you the best offers, then present you with multiple options.

Correspondent lenders

Correspondent lenders also have relationships with multiple sources of mortgage financing. (Some of those sources might also offer retail and wholesale mortgages.) Like brokers, they will shop around to get you the best deal. Unlike brokers, correspondent lenders will fund your loan with their own money. 

Learn More: How to qualify for a mortgage

What to consider before applying for a $350,000 mortgage

As a first-time homebuyer, it’s especially important to learn both the short-term and long-term costs of any property and home loan you’re considering. Most of these costs will be unfamiliar if you haven’t owned real estate before, and you need to make sure you’re financially prepared for them.

Short-term costs

In the short term, you’ll need to cover these costs:

• Down payment: The average down payment was 16% at the end of 2023, according to CoreLogic, though you could qualify for a conventional loan with a down payment as low as 3%. Keep in mind that your lender might require you to pay for private mortgage insurance if you put less than 20% down. 
• Closing costs: These typically include origination fees, title fees, and appraisal fees, among other items. Assurance IQ found that the average closing costs were $4,243 last year, but this can vary based on your home’s price. Plan to spend about 2% to 5% of your home’s value on closing costs. 
• Moving expenses: Redfin estimated that moving costs can range from $1,500 to $5,000 depending on the amount you’re moving and how far you need to travel. Take into account supplies such as boxes, tape, and bubble wrap, as well as moving day necessities like a truck, gas/tolls, and a moving crew, if you hire one. 

Long-term costs

Savvy homeowners make a consistent habit of saving for long-term costs. Putting the money in a dedicated savings account can help you prepare for these expenses:

• Repairs: Clogged toilets, loose shingles, leaky water heaters, warm air conditioners, garage door openers
• Maintenance: Tree trimming, furnace cleaning, chimney sweeping, pest control
• Renovations: Paint, flooring, lighting, windows, solar panels, electrical panels, countertops 
• Insurance: Homeowners insurance, and possibly flood, windstorm, or earthquake insurance
• Property taxes: Mandatory funding for local government services
• Association fees: Ongoing dues, plus pricey special assessments if a major expense comes up
• Mortgage insurance: Required until your equity reaches 20% on a conventional loan and potentially for the entire term of an FHA loan
• Interest: Can add up to a serious sum over time

Amortization table on a $200,000 mortgage

This amortization schedule for a 30-year, $200,000 mortgage with a 6% fixed rate shows how your monthly payment breaks down into interest and principal. Each month, you pay more principal and less interest. Your home equity increases and your debt decreases.

A 15-year term changes the picture. Your monthly payment will be higher because you’re paying off the principal (and becoming mortgage-free) in half the time.

How to get a $200,000 mortgage

Getting a mortgage can be a lengthy process, but it may feel simpler if you’re prepared:

1. Create a budget: Figure out a comfortable monthly payment that doesn’t force you to compromise on retirement contributions or emergency savings. A common guideline you can follow is to spend less than 28% of your pre-tax income on your mortgage payment, according to Freddie Mac. Make sure you can pay for your home loan, cover any outstanding debts you have, and save for emergencies without overextending yourself. You can also find online calculators, like the one Freddie Mac offers, to help you see what you can afford.
2. Check your credit: Check your credit reports and scores from reputable free sources, such as AnnualCreditReport.com. Look for mistakes and areas you can improve, like on-time payments and credit utilization.
3. Get pre-approved: Submit mortgage pre-approval applications with multiple lenders on the same day to compare rates and fees. Your credit score might drop a few points when you apply for pre-approval because it indicates you’re planning to take out a large loan, but if you submit your applications close together, your score should only change once.
4. Compare offers: Choose the lender with the best overall deal for your situation. Look at the annual percentage rate (APR) and what factors determine that rate. For example, some banks might offer a slightly lower rate for their customers, while other lenders might quote you a rate that assumes you’re paying discount points (paying more money upfront in exchange for a lower interest rate). When you compare lenders, check what their APR offers are based on so you can see what fits with your situation.
5. Prepare to close: After you make an offer on a house and it’s accepted, you’ll begin the closing process. During this time, you’ll formally apply for your mortgage loan, schedule any required appraisals or inspections, and sign up for homeowners insurance. Closing takes an average of 30 to 45 days, according to Zillow, but it can vary depending on your lender and situation. You can help closing stay on track by having your financial documents ready and responding quickly to requests from your lender. In addition, try not to make any major changes. Don’t open new accounts, change jobs, or transfer funds.
6. Sign your closing documents: On closing day, you sign the mortgage loan agreement and get the keys to your home. According to the Consumer Financial Protection Bureau, your real estate agent, title insurance company, escrow company, attorney, and lender could be involved on closing day. Take your time reviewing documents. Ask questions and seek expert advice if needed.