Looking to Buy a $300,000 Home? Here's What You Might Pay Based on Today's Mortgage Rates

Buying a home is not an easy thing to do these days. A glaring lack of inventory has left buyers with limited options, and elevated home prices are making it difficult for buyers to find a home they can afford.

In July, the median U.S. home sold for about $407,000, according to the National Association of Realtors. So if you're in the market for a $300,000 home, you're spending about 25% less than the typical buyer.

But that doesn't mean you're looking at an affordable mortgage payment. Because mortgage rates are up these days, even buying a $300,000 home with a decent-size down payment might leave you scrambling to pay your loan servicer every month.

What will a $300,000 home cost you on a monthly basis?

The average 30-year mortgage rate today is 7.18%, according to Freddie Mac, while the average 15-year mortgage rate is 6.51%. If you sign a 15-year mortgage, your monthly payments will be higher than with a 30-year loan, but you'll rack up less interest on your mortgage loan overall.

Now let's assume you're able to make a 20% down payment on your $300,000 home, leaving you with a $240,000 mortgage balance. With a 30-year loan, based on today's rates, you're looking at a monthly payment of $1,625 for principal and interest. With a 15-year loan, you're looking at a monthly payment of $2,091. Both numbers assume the rates mentioned above.

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As you can see, with a 15-year loan, you'll be paying an extra $466 a month, which is a sum you may not be able to afford. However, you should also know that if you go with a 15-year loan, you'll end up spending a total of $136,413 on interest in the course of paying off your home. If you go with a 30-year loan, you'll end up spending $345,074 on interest. So while an extra $446 a month may be a stretch, if you can swing it, you stand to save yourself almost $209,000 on interest all in.

Can you afford a $300,000 home today?

As a general rule, your predictable housing costs should not exceed 30% of your take-home pay. Going beyond that limit could put you at risk of falling behind on your housing expenses or other bills.

But when we talk about housing costs in this context, we're referring to expenses like homeowners insurance and property taxes as well as a mortgage. So, let's say you're looking at a $1,625 monthly mortgage payment, plus another $375 a month in property taxes and homeowners insurance costs. That brings your housing costs to $2,000 a month.

If you bring home $6,667 a month or more, then that's generally a safe amount of housing expense to take on, provided your other bills aren't above average. But if you only bring home $5,000 a month, then you may not be able to afford a $300,000 home today unless you make a down payment much larger than 20% or truly have minimal expenses outside of housing (for example, if you have zero debt, no childcare costs, and no car to pay for).

You'd think that $300,000 would be a reasonable amount of money to spend on a home. But because mortgage rates are so high, even a modestly priced home becomes expensive.

If you can't afford a home in that price range right now, it could pay to wait a year or so and see if mortgage rates come down. Waiting will also allow you to save up more of a down payment, thereby lowering your monthly costs.

Of course, there's also the option to look at a less expensive home if you're eager to buy today. But given where home prices stand, you may be hard-pressed to find something below $300,000 in many parts of the country.