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Are you thinking about buying a home but don’t know how much you should spend? In this video, I’m going to walk you through how to determine a monthly housing payment you’re comfortable with. By breaking down the costs of homeownership, you’ll be able to make the best decision that will be right for you.

Your Monthly Housing Costs

Buying a house can be an emotional decision, and sometimes emotional decisions can be bad ones. If you’re thinking about buying a home soon, the first and most important point to consider is how much you are willing to spend.

The first place we need to start is to break down all the monthly costs associated with homeownership. In addition to your mortgage payment, there are other costs of owning a home every month. You need to find out what your cap of expenses is that you’re willing to pay every month to own a home.

One way to do this is by reverse engineering. This is the word that I like to talk about with my lender all the time. We want to figure out how much you’re willing to spend each month so we can reverse engineer a purchase price.

Mortgage Payment And Taxes

If you’re obtaining a loan to purchase your home, there are going to be two major components of that payment. First, you’re going to have your principal payment plus your interest. This is going to be a fixed amount every month for you. A portion of that fixed amount is going to be applied to your principal, and the other fixed part of that will be applied to your interest. Your mortgage payment will never change, but certain other variables will depending on the property. Every property is going to have a tax bill, and every tax bill is going to be different.

The reason they’re different is that properties are assessed taxes at the time of sale based on the price. That’s why you’re going to see varying property tax amounts as you’re looking around—even within the same neighborhood—because it’s all based on time of purchase at the price of purchase.

To give yourself a pretty clever estimate of what your annual property taxes would be in San Diego County, you can use a simple equation. Take your purchase price, multiply it by 1.25%, and that’s going to give you your annual property tax. Divide that by 12, and that’ll be your monthly taxes. If you purchase a home for $700,000, your property taxes are going to be roughly $8,750 per year. Divided out into a monthly payment, and that would be $729 a month. Pretty good fast math, huh?

Homeowner’s Association Fees

One of the other things you’re going to need to take into consideration when buying a home in San Diego County is HOAs. If you are living in a condo, almost assuredly you have a Homeowners Association fee every month. Additionally, single-family homes are often built in PUDs, or Planned Urban Developments. These also have a monthly fee.

Your homeowner association fees are used for trash, water, sewage, termite protection, and general building and grounds maintenance. If you have common area facilities like a barbecue area, swimming pool, jacuzzi, a training room, or manned security from dusk till dawn, those are what your HOA fees cover.

Private Mortgage Insurance

Another expense you might incur related to getting a loan is PMI, or private mortgage insurance. If you’re using a loan to purchase the property, this is something a lender might tack onto your loan if you don’t put at least 20% down. They think that, if you don’t put at least 20% of your own money into the loan, it’s riskier.

Once you get 20% equity, you can have your PMI removed. You need to be on top of that; when you know that your home has 20% equity, you want to call your lender and ask to have it taken off your loan. This way, you’ll save more money every month.

This is also something that you want to talk with your lender about when you’re getting pre-approved upfront so there are no surprises. You can calculate PMI into your mortgage payment to make sure you’re comfortable with your monthly housing expenses.

Searching Within Your Budget

Before you start looking at properties, we have to take into consideration your budget. Then, we have to set up a search that stays within those parameters. This will allow us to look at the right properties for you and your budget.

The last thing you want to do is fall in love with a property that’s way over your budget. I’ve been there before and trust me—it’s not what you want to do. We want to do all that homework upfront to make sure we’re looking at things that you can afford. We don’t want you to fall in love with that three-million-dollar house. I guarantee you’ll love it, but you won’t love the payment.

I hope this helped you identify the various costs of owning a home to help you get better prepared for the process. If there’s anything that I can do to help, please give me a call at (619) 925-2322. I look forward to hearing from you.

Are you thinking of moving but are having trouble figuring out where you want to go? In this video, I’m going to walk you through where, when, why, and what you should buy when looking for a new home. I’ll help you narrow down your options by considering the three most important things to consider when deciding where to live: price, location, and amenities.

Sorting Out Your Needs And Wants

One of the hardest things about moving is figuring out where you want to live. There are so many things to consider, and the process can be overwhelming. Do you need to be near work? Are you looking for a place with the right schools for your kids? Or are you just trying to figure out where in San Diego you can get the biggest bang for your buck? Out of all these questions, trying to decide where to live can be difficult

Buying a new home is like a process of elimination. It’s figuring out your needs versus your wants to decide which way you should go. Are your needs more important or are your wants more important? Do you want that affordable monthly payment or breathtaking view? To narrow it down, we’ll consider the three most important things when it comes to choosing what to buy.

#1: Your total monthly payment. The first thing—and maybe the most important thing—is what your total monthly payment will be. This includes everything associated with the cost of the house, like your principal, interest, taxes, and insurance.

Are there any homeowners association fees? Are there any Mello-Roos fees or other special tax bonds? What are those fees altogether calculated out into a monthly expense? What is that number for you? Where do we need to cap that so that you’re happy? These are all important questions to consider.

#2: Location. The second thing to consider is how important location is to you. Do you need to be really close to work? Do you need to be really close to your kid’s school? Do you need to be within walking distance of grocery stores, the park, bars, or restaurants? Or, is it okay if those things are further away and you don’t mind driving? Do you need to be close to the ocean? Are you a surfer, bro? Do you need to catch some waves in the morning? These can all be deciding factors.

#3: The features of your home. The third thing to consider is what features a home needs to have for you to move forward with it. In other words, does your new home have to have four bedrooms and three bathrooms? Could you settle for less? Do you have to have new construction because you cannot stand the idea of replacing anything? You may want a home to be turnkey and move-in ready. Some people just don’t like shag carpet.

Searching Within Your Budget

The first and most important thing you need to realize is that no one gets everything. You just don’t. It doesn’t matter what your price point is; you’re always going to have to compromise on one of those things. Location, price, and amenities always need to be considered and ranked in their priority order for you.

For example, what if you found a great home with the price that suits you in the neighborhood you want—but the interior needs updating? Or what if you went $20,000 over budget, but you got the house of your dreams in the place that you want and with all your amenities? What if your house came $50,000 under your budget, but you had to sacrifice location?

For most people, the most important factor is going to be price—unless you won the lottery or somebody left you a ton of money and budget is not a factor. If that’s the case, we can go ahead and cross price right off the map. Usually, though, price is the first thing that we have to consider. Once we figure out what your budget is, that will automatically help us with geography. Certain neighborhoods are just going to be exed out because they’re not going to fall within that budget. Conversely, there are going to be a lot of neighborhoods that’ll be put into your search parameters because they’ll fit within your price range.

Amenities And Location

Once we have your budget nailed down, we have to consider amenities and location. It’s up to you to decide what’s most important. Is it the location or is it the amenities that the property is giving to you? For example, if you know you need a fourth bedroom and we’ve already nailed down your budget and monthly payment, that’s going to narrow down the neighborhoods that we can look in for you. It will make your search much easier.

On the other hand, if the location is more important and you are willing to sacrifice some amenities, then we can go ahead and zero in on the location first. For example, maybe you thought you needed a four-bedroom house at first. Now you realize that location is more important, and a two- or three-bedroom will do. That’s going to make our search much easier.

A Process Of Elimination

A good real estate agent is going to help you determine what’s important to you, but fair warning: you may end up with something that was the complete opposite of what you thought you wanted. Sometimes, these things change. In fact, they almost always do.

Finding a new home is really just a process of elimination. The sooner you realize what your needs are, the easier it will become. I hope this helped you understand the most important factors to consider when finding a new home. If you have any questions about buying a house or home here in San Diego, please give me a call. I would love to talk to you and help you narrow down your home search!