Well, if you want the short answer. More than you think.
Let’s jump right into an example. Let says you put 20% down($50,000) on an $250,000 home and borrow the remaining $200,000 with a 30-year mortgage. Let’s assume that you have great credit and you get the loan at 4%. Over the course of the loan, you’d pay about $150,000 in interest alone. The entire cost of the home would be a little shy of $400,000. Now let’s assume your credit was not as good and you got the same mortgage at 8%. You’d pay nearly $580,000 for the same exact house!
Are there any better options? Well, the best option is to buy a modest home that you can afford and pay off quickly. You’d save a significant amount in interest if you pay off your mortgage in 5-10 years. Renting is not a good long-term option because you never build up any equity. This can be a huge issue considering that the average American’s largest asset at retirement is their home.
The Bottom Line: Be smart before you sign. Your home can have the largest and farthest reaching impacts on your financial life because it is often the largest purchase that you’ll ever make.