We all know that market conditions have impacted the affordability of everything from steak to gas to housing.
So if you’re looking to change your housing situation, make sure you know all of the items that go into your total monthly housing expenses – especially the costs that are billed on an annual or half-yearly basis.
With that in mind, here are the things you need to consider if you want an accurate picture of your monthly nut.
Mortgage payment: This includes payment of principal and interest. This gets tricky, however, because payment will be based on the interest rate you agree to, not the rate you hear advertised. It is very time sensitive and specific to your situation.
The other tricky part is that you usually don’t lock in your rate until you’ve signed a purchase agreement for a specific home. Your best bet is to create a spreadsheet that calculates the monthly payment at progressively higher interest rates on gradually increasing loan amounts. This will help you find your sweet spot for an affordable price.
Property taxes: In California, property taxes are due twice a year, with each payment covering half of the annual amount owed. It’s based on the home’s assessed value, determined by your purchase price, not the amount of the previous owner’s property tax bill. Many lenders use an annual property tax estimate of 1.25% when they pre-approve you for a home loan. But each home will have its own fee breakdown, which can be found online by address or package number.
Once you get familiar with a few property tax bills, you’ll be able to spot variables such as water district bonds, school district bonds, public sewers, local pest control that may increase or reduce your potential tax rate. You can choose to “forfeit” your taxes and include them in your monthly mortgage payment rather than paying them every six months. Your mortgage services company will pay your semi-annual tax bill.
Special assessments and Mello Roos: These additional costs will also appear on the current owner’s property tax bill. Check if these are fixed amounts or if they vary according to the assessed value of the house.
Consider calling the phone number associated with the appraisal to ask when it will be paid. You can choose to bear the additional costs for a few years, knowing that they will disappear in the future.
Contributions to the association of co-owners: Find out what the amount is and if there’s a special assessment going on to cover things like pool upgrades, roof repairs, or other major maintenance projects. You don’t want to be surprised at the last minute.
This should be part of your disclosures at the start of the escrow.
Home insurance: You can estimate this cost by asking current owners what they are paying or by calling your own insurance company. This is usually paid annually or semi-annually, and most mortgage companies require the first year to be paid in escrow. It will appear as one of the closing costs.
Utilities and maintenance: Ask current owners what they pay each month for utilities such as gas, water, electricity, garbage, cable/internet. Other monthly expenses to consider are gardening, pool maintenance and pest control. If there are solar panels, be sure to find out if they are owned or rented and how much you will have to pay on a monthly basis.
Piece of cake, right?
Leslie Sargent Eskildsen is an agent at RealtyOne Group West and a board member of the California Association of Realtors. She can be reached at 949-678-3373 or [email protected]