It's Just a House Payment, Right?

If you’re in the market for a home, you may be thinking about what type of home you want, what neighborhood or city you want to live in or even the colors on the wall! All great things to consider. But something else to consider is the house payment you’re comfortable making. If buying your first home, you might be thinking about all the above. If you’re coming from a rent-free situation, like living with family, or even living in an apartment, there are other “payments” to consider, some of which you may already pay if you rent.

Let’s start with some basic parts of your payment.  If you’re financing your home, you will have a portion of your payment going to the lender, principal and interest.  This pays back the loan. More than likely, you will also have property taxes and homeowner’s insurance as part of your payment.  These items are called escrows.  You’re required to escrow if you do conventional financing with less than 20% down or a government-backed loan, such as FHA or VA financing¹.  Escrowing is where the lender collects one-twelfth of your annual property taxes and one-twelfth of your annual homeowner’s insurance in your house payment.  The lender puts that money aside until we get the tax bill from the county/city and your annual insurance renewal bill from your insurance agent.  The lender will pay these bills on your behalf.  As the homeowner, you will also get a statement from the county/city and your insurance agent. If taxes and insurance are escrowed, you will not need to pay these bills.

An additional payment could also be required if you buy a townhome, condo or a single-family home within a planned-unit development.  These are called homeowner’s association dues and could be paid monthly (most typical), quarterly or annually.  While these are not part of your house payment to the lender, they are factored into your loan qualifications.  A piece of advice … if you start your loan process with a lender looking at single family homes, then change to a property type with association dues, please let your lender know immediately.  They will need to run new figures taking the dues into account.

Other factors, or payments, to consider are utilities.  If you have never lived on your own, these can be something new.  In a single-family home, you’ll have water, sewer, electricity and gas, not to mention possible extras like internet or security.  Your real estate agent might be able to get you some approximate figures for some of these bills.  Keep in mind, if you’re a family of three and you buy a home from a single person, these utility estimates could vary. It’s good to go into the home buying process understanding that’s it’s not just a house payment that you’re “signing up” for – there are other things to consider when deciding if homeownership is right for you, the other expenses and responsibility.  We are happy to chat with you more about your homeownership dreams and making them a reality to fit your budget.

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¹We are unable to support VA and FHA mortgage loans in Alaska, Arizona, Hawaii, Massachusetts, Nevada, New York, Rhode Island, U.S. Virgin Islands, Virginia, or Washington DC. Not available for manufactured homes or investment properties. Please speak to a loan officer for more details.