16 August . 2018
I’m ready to buy a new home. What will my monthly payment be?
Buying a new home for the first time can seem a little overwhelming and confusion, but it’s easy to understand the few basic components that make up your monthly mortgage payment.
In a nutshell, your monthly payment is commonly referred to as “PITI,” or principal, interest, taxes and insurance.
Principal is the balance of money borrowed for the mortgage, after the down payment. This does not include interest, which is calculated on the principal. If you are purchasing a $300,000 home with a 10% down payment, the principal is $270,000.
Interest is the charge for lending you the money over the life of the mortgage loan. Bankrate is one of many websites offering a mortgage calculator that allows you to calculate your monthly principal and interest (P&I) payment using current market interest rates. Please note that interest rates are subject to change, may vary by region and by the individual homebuyer, and that the P&I subtotal does not include taxes and insurance.
Taxes, or specifically property taxes, are set by local entities and are based on the value of the property, which is set each year by the local appraisal authority. Taxes levied by the local school district typically account for roughly half of the overall annual tax bill, with additional taxes coming from city and county governments and any other local taxing entities, such as a community college or hospital district. Communities such as Sweetwater are part of Municipal Utility Districts, which levy taxes to pay for water and sewer services for residents living in areas not covered by city services.
Tax rates can vary by year, and the overall tax bill can vary depending on the current appraised value of the property. At Sweetwater, the overall 2018 tax rate is $2.993 per $100 valuation. For a home valued at $300,000, the annual tax bill would be roughly $8,979 with the homestead exemption that is offered for a primary residences. In many cases, local property taxes can be deducted from a homeowner’s federal income tax return, effectively reducing the overall tax expense.
Insurance is the final component of the monthly mortgage payment. Required by the mortgage company (and always a good idea, regardless), homeowners insurance protects the home against occurrences such as fire or wind damage. Some lenders, including FHA, require private mortgage insurance if the borrower has less than a 20% down payment. This insurance can be removed once the borrower achieves 20% equity in the home, through making monthly payments or an increase in property value, or a combination of both.
Other homeownership expenses can include the HOA, or homeowner’s association fee, which is billed separately on an annual basis in most communities, including Sweetwater. At Sweetwater, the 2018 HOA dues of approx. $650.00/year provide for the maintenance of common areas and for amenities such as the Sweetwater Club, parks, and miles of trails.
For more information, ask your Realtor. Our leading homebuilders can provide a wealth of expert information on the costs – and rewards – of homeownership.
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