How Much Can I Afford in a Phoenix Condo or Loft?

When you see a condo advertised for $175,000, how do you determine if you can comfortably afford it? In the world of rentals, you have just one monthly payment, but as a real estate owner, you’ll have more “ingredients” to a monthly payment, which will include:

Your principal and interest payments – this is your monthly payment to pay back the loan you’ll get from a lender.

Homeowner’s Association Fees

That’s the amount you kick in to help maintain the common areas of a condominium or townhome community and pay for water, sewer and garbage. Even most communities of single family homes have a homeowner’s association, but fees are often less because water, sewer, garbage and building maintenance is not included.

Taxes

County taxes are actually paid twice a year, but most lenders like to collect that money from you on a monthly basis so that the money is available at tax time.

Insurance

For condos, you should consider a basic policy that is very inexpensive, usually under $30 per month. Condo insurance usually covers liability and your contents. If you are purchasing a townhome or patio home (stand-alone with no shared walls), you may need to purchase a true “homeowner’s” policy which can be somewhat more expensive. Check with your insurance professional to find out what coverage you’ll need.

Your Monthly Payment

To get an exact monthly payment, you’ll need to find out these four numbers from your real estate agent and mortgage professional. However, you can estimate a monthly payment. Here is a basic scenario for a first time homebuyer:

Home price:	$150,000
Assumed Down payment:	10% or $15,000
Assumed interest rate:	7% for the first loan of 80%, 10% for the second loan of 10% (your interest rate could be less if you finance only 80%)
Assumed loan:	30 year fixed principal and interest (this is the most conservative loan type)
First loan payment:	$798 per month
Second loan payment:	$131 per month
Typical HOA:	$180 per month
Typical taxes:	$100 per month
Insurance:	$20
Monthly payment:	$1229 per month

The first year, you’ll be paying about $8,300 in interest, which can be a deduction on your income tax (talk to your accountant), and you’ll apply about $1200 in equity to your home. So it’s not really fair to compare your monthly mortgage payment to a rent payment, because of this added bonus at tax time. However, it is important to know if you can afford the extra monthly costs of owning a home.

The above calculation is for a typical situation, but your monthly payment may be different based on a number of factors, including your credit history, the current interest rates, your loan type and your down payment.

Want to know more? Play with different monthly payment scenarios with this Mortgage Calculator. Check with a good mortgage professional to get a more exact estimate of your monthly loan payments (we have recommendations if you don’t know of any), and give us a call to help you find the perfect place.

More information available at UnderstandingHomeLoans.com

 

 

 

Information Deemed Reliable But Not Guaranteed. The Fair Housing Act prohibits discrimination in housing based on color, race, religion, national origin, sex, familial status, or disability.