This is just the first step in deciding how much you can afford. As you move forward in your home search and mortgage process, you'll gather more information and can refine your assumptions. Come back to this step and revisit your budget and your calculations as you gather more information.
Many homeowners pay their property taxes and homeowners insurance bundled into their mortgage payment. This arrangement is known as an escrow account. If you do not have an escrow account, you will still have to pay these costs. An escrow account lets you put aside the money monthly so that you won't have a big expense during the year.
Some types of homes may have additional required monthly costs. If you're interested in buying a condo, co-op, or a home in a planned subdivision or other organized community with shared services, you usually have to pay condo fees or Homeowners Association (HOA) dues. These fees vary widely depending on the amenities provided by the community. Consider these fees carefully when comparing potential homes. You may not be able to afford a home that is generally in your price range if the condo or HOA fees are higher than you were expecting. Condo or HOA fees are paid separately from your monthly mortgage payment.
Owning a home means more than just trading a rent payment for a mortgage payment. New homeowners are often surprised by the extra costs of owning property, including insurance, taxes, and association or condo fees. You also have repair costs, upkeep, and may want to make improvements and upgrades. A bigger space may need new furnishings or appliances. Finally, there are things you pay for as a homeowner that may have been included in your rent previously, such as water, trash pickup, and other utilities.