I'm planning to buy my first house. How do I estimate my total monthly costs for a house before I submit an offer?
First, it's important to understand that your monthly costs include more than just a mortgage payment.
You'll also be responsible for property taxes and private mortgage insurance (PMI) if your down payment was under 20 percent. For most buyers, these costs will be included in your regular mortgage payment. Property taxes vary by jurisdiction, while PMI costs between .46 and 1.5 percent of the original loan amount per year. You can check local property records (many municipalities maintain online databases) to find out the most recent property tax information, but PMI can vary by lender and mortgage type, and might be more difficult to project in advance.
If you know your approximate down payment, home price, loan term, and interest rate, you can use an online mortgage payment calculator (try bankrate.com/mortgages/mortgage-calculator/) to estimate your total monthly payment. But keep in mind that it's just a rough projection — not a crystal ball.
Your loan agreement will also almost certainly require you to maintain homeowners insurance. If you buy a home in a high-risk area, such as a flood or wildfire zone, you might face additional insurance requirements that can incur higher monthly costs. Carefully check local, state, and federal regulations to find out if your potential new home is in a high-risk area, and talk to an insurance agent to learn about your options and the possible costs.
