When most homebuyers sit down to calculate whether they can afford a particular home, they often assume their monthly mortgage payment will include only the principal and the interest. Many forget to factor in property taxes and their monthly homeowners’ insurance premium. This often leads borrowers to experience sticker shock when they see what a property will actually cost them, and it may also prevent some from qualifying for a property they believed they would have no trouble purchasing. This is especially true in areas that have very high property taxes.
Those applying for jumbo mortgages — loans in excess of $417,000 in most parts of the country or $625,500 in higher-priced areas — are also likely to face high property taxes. Total Mortgage Services CEO John Walsh points out that most potential buyers are focused on interest rates but fail to look at property tax rates or include their prorated monthly insurance premium if it is being rolled into their monthly mortgage payment.
Guaranteed Rate CEO, Victor Ciardelli, adds that potential borrowers who cannot show a steady income, such as those who are self-employed, must be especially careful to look at property taxes and insurance premiums because these two additions to the mortgage may make their debt-to-income ratio higher than most lenders like. This may force them to make a larger down payment in order to qualify for their mortgage.