Should I take out a $200,000 mortgage?

When you take out a $200,000 mortgage, your principal and interest aren’t the only costs you'll need to account for. You’ll also need to factor in some money upfront, as well as additional money each month to cover other recurring expenses that may be rolled into your mortgage payment.

What factors affect my monthly mortgage payment on a $200K loan?

The other major factor that influences your monthly mortgage payment on a $200K loan is your interest rate. We already mentioned that the length of your loan can impact your interest rate, but other factors like your credit score, loan-to-value ratio and down payment amount also come into play. A higher interest rate means a higher monthly payment.

Can you afford a $200k mortgage with a 20% down payment?

To afford a $200K mortgage with a 20% down payment, 30-year term and 7.00% interest rate, you’d need to make at least $38,268 a year before taxes. How much you ultimately can afford depends on your down payment, loan terms, taxes and insurance. As a general rule, your mortgage payment shouldn’t exceed one-third of your monthly income.