“I’ve seen some real estate in Dunedin that I’d want to purchase, but can I afford it?”
It’s time to determine how high you can go on the price of the properties you’ll be looking at if you’re planning to purchase a house, condo, or townhouse soon and you know how much you want your monthly payments to be.
In this article, I’ll discuss where you can find the information you need to establish the highest price you can pay for a house based on how much money you have set aside each month for it. You should know the many expenses included in your monthly loan payment, which are also explained here.
Weekly Budget
Let’s first look at how much you’ve determined you can spend each month and see whether it will work. I know you probably already know how much you can afford each month, but we need to ensure you’ve included all the costs associated with your new house.
You might not know the additional costs you need to factor into your monthly budget if you calculated how much you can afford based on how much rent you pay each month or how much a mortgage loan payment would be.
The principal and interest portion of the monthly loan payment is easy to calculate. It depends on the loan amount (the purchase price of the home, less your down payment), the interest rate, and the loan term.
In addition to the principle and interest, the lender will add a monthly sum to your loan to pay the expected amount of your property taxes and a portion of your yearly homeowner’s and, if applicable, flood insurance premium.
The total amount you will pay to your lender each month comprises these four items: Principle, Interest, Taxes, and Insurance (also referred to sometimes as PITI).
You will additionally pay a monthly sum for Mortgage Insurance if you apply for an FHA or conventional loan with less than a 20% down payment.
Also, your monthly payment may increase if a homeowner’s association, condo association, or maintenance fee is required. But, if it is not included in your loan payment, you will still be liable for paying it individually and should account for it in your budget’s monthly payment total.
As a result, you must consider the following when calculating your monthly payment:
1. Principal and interest – figure out what your interest rate will be from your mortgage broker or loan officer. If you know the interest rate, loan term, and the amount you will be putting down, they can tell you what your monthly principal and interest amount will be for various loan amounts, or you can go online and use a mortgage calculator to figure this out.
2. Taxation – The 2010 tax rate in Dunedin is $19.4994 for every $1000 of taxable property. Take the price you’re considering as your top price and multiply it by.0194994 to approximate where your annual taxes would be, as the taxable value may differ from the purchase price. This can help you determine how much you can afford to spend.
3. Insurance – While most areas in Dunedin do not require flood insurance, some regions are considered flood zones. If you are considering moving to a part that might need flood insurance, contact your insurance agent to receive flood and home insurance estimates. Try to convince them to offer you a range even if they are hesitant or say they need more information about the house.
4. Ask your mortgage broker or loan officer how much this will cost each month for the highest price you are considering paying if mortgage insurance is necessary for the loan you are applying for.
5. Maintenance costs and Homeowner’s Association dues – You won’t know this until you look at listings. Once you have the data for the 4 points above, you can determine the amount of breathing room between the sum and your monthly allocated amount. You might need to lower the top price in your range to make more room for these costs.
Let’s now examine a fictitious example to provide you with a concept of how this might function (the numbers used are not from real property or based on what actual taxes or insurance would be).
The maximum monthly payment for your new house is $2670.
Your prequalification for a loan up to $400,000 at 6% interest and 20% down is based on your conversation with a mortgage broker.
Although your realtor believes the house is overvalued and can convince the seller to accept a $360,000 offer, the home you wish to buy is listed for $380,000.
The necessary homeowner’s association fee is $600 per year.
Your annual homeowner’s premium would be $3600, and your insurance agent informs you that you do not require flood insurance.
For your property taxes, you’ll apply for a homestead exemption.
For a loan of $288,000, your principal and interest payments each month will be $1726.71. A $360,000 house costs $288,000 to buy with a 20% down payment. The mortgage payment is based on a $288,000 loan with a 30-year term and a 6% interest rate.
The anticipated monthly cost of property taxes is $587.98. This is based on calculating the $360,000 purchase price by the.0194994 Dunedin tax rate. (Based on what the previous owner paid in taxes, the actual amount paid each month may be lower initially. However, you should be ready for what the tariffs may escalate to in the next 1-2 years rather than receiving an unwanted surprise later.)
Monthly homeowner’s association dues are $50, and homeowner’s insurance is $300.
Your total monthly payment would be $2664.69 (PITI plus associated fees).
You can now see that even though you have been given a loan amount of up to $400,000, you must keep the price of any property you buy at most $360,000 to stay within your monthly income range. Of course, this could alter if you select a different property with a higher or lower homeowner’s or condo association cost or if it requires flood insurance.
Read also: Tricks for Selling Your Home Fast
