Buyers, How should you determine your total monthly home payment?

 Needless to say, nearly half the clients with whom I work are buyers, and one of the questions they ALWAYS ask me is, “Bobbi, with EVERYTHING included, what can I expect my monthly home payment to be?”  Of course, I can determine 1/12 of the yearly taxes and I’ll have at my disposal, the monthly HOA fee, but I will not know the mortgage product that will best suit their needs.  Consequently, I refer them to Justin Miller, Mortgage Banker at Fembi Mortgage (754-214-7449), because I know Justin will help them pick the right product for their personal situation.  I’m also confident Justin will provide them with an estimated monthly  payment which will include all the monthly fees they will incur.

I asked Justin what formula or process he uses to determine the total monthly cost for a buyer and this is what Justin had to say: 

All too often I see estimates that borrowers get from other mortgage originators that have the taxes and insurance estimated way too low.  I don’t know about you but I don’t want to see the best case scenario.  I don’t necessarily want to see the worst case scenario either, but shouldn’t the mortgage professional be good at estimating what the payment will be?  You would think so.

 In South Florida, it is hard to estimate what the taxes will be since the first year or so are based on the seller’s current tax rate.  However, we shouldn’t be concerned so much with what it will be for a short period of time but what it will be going forward.  Right now the tax rates are relatively low because property values have come down.  It is best to use 2% of your purchase price to calculate what your taxes will be once they are reassessed based on your purchase price.  If you want to be more accurate you can use Broward County Property Appraiser’s tax estimator, http://bcpa.net/TaxCalc.asp, but make sure to read the disclaimer because your purchase price may not be market value.  I tell all of my clients to make sure to call or email me with the address of the property that they are looking to purchase so I can put together a new estimate based on the seller’s current tax rate. 

 The other tricky estimate is the homeowners insurance because it is going to depend on the age of the property, the age of the roof, if there are shutters, hurricane proof glass, etc.  You will want to make sure to get a wind mitigation inspection which costs around $150 to help reduce your yearly insurance premiums.  It is best to use 1.25% to 1.5% of the loan amount.  Even if you are not in a flood zone it isn’t a bad idea to have flood insurance so I would suggest adding another $400/year to your estimate. 

 This shouldn’t be something you, as a consumer, should ever have to worry about if you are dealing with a mortgage professional but unfortunately sometimes you just don’t know who you are dealing with and if they are trying to make their estimate look good versus their competitors.  Be careful.

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