I currently have a townhouse listed in Gainesville, FL that is priced at $119,900.
I had a lender I work with estimate the monthly mortgage payment which includes Principle, Interest, Taxes and Insurance (home owner's insurance), or PITI. She also included the condo association fee so that my customers would have the full picture.
There is a condo on the market here that is not a listing of mine, but it is priced at $99,000. I have a set of customers that are interested in purchasing a condo or townhome, and they would like the lowest mortgage payment possible. I had the same lender calculate the PITI and add the association fee for this condo to estimate the total mortgage payment for my customers.
In both instances she was using a 6% interest rate (since she reviewed all of my customer's information and felt she could offer this to them) using an FHA loan program (97% financing, 3% down). Most lenders will require the customer to carry mortgage insurance if the customer is putting less than 20% down. There are loan programs available to remove this criteria, but FHA is not one of them. Mortgage insurance (around $60 or so/month if I recall correctly) WAS ALSO included in the monthly mortgage payment for both of these properties. The lender also calculated the mortgage payment estimating next year's taxes and adding in the homestead tax exemption to really try to be as on target as possible when it came to the mortgage payment.
Which of these properties would you think would have the lowest mortgage payment? Surprisingly, the listing that is $20,000 more had a lower estimated payment by about $60/month. Here is why:
1. The townhouse currently has taxes in the $560 range. The lender estimated the taxes would increase to about $1400/year for the new owner (sales typically trigger re-assessments by the property appraiser). The association fees for this unit are only $127/month (which includes the exterior hazard insurance to where the buyer will be responsible for obtaining coverage on the interior of the unit). With PITI, the $127 association fee AND the mortgage insurance, the lender estimated the payments to be at approximately $960/month.
2. The condo, while less expensive, has association fees of closer to $200/month and the current taxes are over $2000/year (the unit has not been homesteaded recently). When the lender calculated an estimate for the new taxes including the homestead exemption and added the association fee (which also covers the exterior hazard insurance), prinicple, interest, and mortgage insurance, her calculation estimated the mortgage payments to be about $1020/month.
The lesson here is that when shopping for any property, the things that are going to affect your mortgage payment are not solely the rate you're going to get and the sales price! When determining which of a handful of properties you'd like to purchase, make sure to compare the real estate taxes, get an estimate for homeowner's/hazard insurance premium, and weigh the association fees (if any) to make sure you're looking at the full picture!
If you are currently in the market for a condo, please make sure to visit my article showcasing the current FHA approved condos on the market.
Make sure to get pre-approved for a loan before shopping for properties!
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Angela Elliott is a licensed Florida REALTOR® with Century 21 Classic Properties in Gainesville, FL. Please visit my profile for more about me and browse my Gainesville, FL real estate website for additional Alachua County information and listings. Your phone calls are always welcome at (352) 256-7038 as are your e-mails to firstname.lastname@example.org. A portion of all my closed sales will be donated to the Alachua Co. Humane Society (View my mission statement).