Many people focus on the price of a home without seriously considering the impact of homeowners insurance cost and property taxes. Don’t overlook these costs because they may factor heavily on your decision to purchase. When you are house hunting, add your estimated homeowners insurance and taxes into the final equation to determine the affordability of the home. Real estate agents will help to calculate and break down an annual and monthly payment. The difference in property taxes across state lines and even different counties may be significant. Besides principal and interest, insurance and tax costs contribute to determining if you can afford a particular property.
Review online real estate listings of the houses you are considering buying to see if they list taxes from the previous year. If they do not, contact the real estate agent selling the home, who may be able to help you obtain this information.
Go to the website of the county where the property you are considering is located if you cannot obtain the tax figure by other means. Most counties have a searchable database that lists current and/or past year property tax bills. If this information is not accessible online, call the county’s office of budget and finance to get help locating this information.
Locate the property’s assessed value from the property’s tax assessment office if you cannot find a recent tax bill. Find the tax rates of the property’s jurisdiction. The taxing jurisdiction may vary from state to state and include counties, municipalities and school districts. Find this information on the appropriate jurisdiction’s websites.
Calculate estimated taxes by multiplying the purchase price of the home by the applicable tax or millage rates. This is an estimate only since values change often and credits and tax relief may apply.
Go to your state insurance department’s website to locate information on homeowners insurance. Most states conduct a homeowners insurance premium comparison and publish this information on their website. You can obtain an estimated homeowners figure from this report.
Divide the estimated taxes and homeowners figures by 12 and add them to the monthly principal and interest payment amount to determine a ballpark monthly mortgage payment. You can then decide if the houses you are considering are in your price range or if you need to look at lower-cost homes or in an area with lower taxes and insurance.
Francine Richards is a licensed multi-state insurance agent with years of human resources and insurance industry experience. Her work has appeared on Blue Cross Blue Shield websites and newsletters, the Houston Chronicle and The Nest. Richards holds a Bachelor of Arts in communications from the University of Maryland.