True or false: Your mortgage payment consists of only the principal and interest. The other costs of owning a home don’t add up to much, so there’s no need to factor them into your monthly payment.
These statements are false! While the principal and interest are the parts of your mortgage payment that receive the most attention, additional monthly costs could make or break your ability to afford the home you want. If you want to know where your potential housing payment stands, it’s time to talk to a mortgage pro.
Breaking Down Your Monthly Housing Payment
There is much more to your mortgage than principal and interest. Here are the other expenses that you need to figure into your monthly payment:
- Property taxes
Unless you qualify for a local assistance program, plan to pay property taxes on your home. This fee, usually assessed once or twice a year, is used to fund community features, schools and local improvement projects. The more your home is worth, the higher your property taxes will be. Property taxes vary widely between communities, so keep that in mind while house hunting.
- Homeowner’s insurance
Like other types of insurance, homeowner’s insurance provides financial protection if some unforeseen disaster happens to your home or on your property. Lenders usually require borrowers to have homeowner’s insurance as a condition of their mortgage, so don’t think you can slip through the cracks without it. Insurance is another cost that varies, so feel free to shop around for the best deal.
- Homeowner’s association fees
More and more housing developments are moving toward an HOA structure. If the home you’re eyeing is a part of an HOA, expect to pay a monthly fee to maintain common areas and keep community amenities running smoothly. HOAs are also the norm in condos and co-op buildings.
- Private mortgage insurance (PMI)
If you are getting a conventional loan and have less than 20% of the purchase price to contribute toward a down payment, expect to pay PMI until you have 20% equity in your property.
Contact Us Today!
Can you afford the home of your dreams? We can give you the tools you need to decide! Contact us today to see what to expect from your monthly mortgage payment.
Connect with one of our loan consultants for more information.