Buying a house is a more complicated process than common-knowledge provides for. Most people think about the cost of owning a home to be just the mortgage, but there is something besides. Property tax is the government required cost of owning a family supported by the local infrastructure. Property taxes pay for schools, roads, parks, public buildings, police, firefighters, emergency services, and safety workers. However, property taxes also have a severe influence on the cost of owning a home. If you do not know a home's property tax or aren't prepared for the additional cost, property tax can catch you by surprise.
ESCROW AND EARNEST MONEY
You'll be asked to put down something called "earnest money" into an escrow account in the home buying process. This assures the buyer that you're serious about the purchase and that money is lost if you fall through on the investment. Your earnest money may be calculated based on local property taxes to cover a specific number of months. By knowing the current property tax rate, you may be able to figure how much earnest-money you need to have and how far it will go to pay property taxes after your purchase.
MONTHLY COST FOR OWNING THE HOUSE
Buying a home involves calculating your future mortgage payments based on a reasonable monthly budget. But your property taxes are also a part of that. Homeowners must prepare to add the property tax amount to their expected monthly mortgage payments. Together, they represent your housing spend.
NEW PROPERTY TAX ASSESTMENT
Property tax is based on the home's assessed value. The assessed value is not the same as the appraised value or your final sale price, but it can change. You can roughly calculate property tax based on sale prices, but the government rates a home's property value by different standards than the real estate market. This means property taxes often stay the same from owner to owner, even if the sale price has changed.
INFLUENCE OF NEIGHBORHOODS AND LOCATION
The location of each house has a strong influence over the "mill rate." The mill rate is the percentage -of-value that your home is taxed. 4% is a typical mill rate in the US. Each region inside a region may add its property tax. For example, your home may have state, county, city, or neighborhood property taxes, which contribute to critical aspects of the local infrastructure.
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