More Than the Mortgage: Don't Forget Other Home Costs

Many first-time homeowners are familiar with expenses such as closing costs and mortgage payments. But when deciding just how much house they can afford, many consumers don't take into account the hidden costs of owning their home.

By failing to consider expenses such as property taxes and maintenance, many homeowners end up stuck in homes that they cannot afford, sinking deeper and deeper into debt.

The result is a national foreclosure rate that keeps climbing -- the rate for May 2008 is up 65% compared to the same period last year, according to RealtyTrac.com -- and a large number of consumers who are left with lousy credit.

If you're thinking about taking advantage of the stalled housing market, make sure you know exactly how much you will have to pay for your new home each month.

When you include housing costs in your budget, make sure you set aside enough to cover the following costs:

Mortgage payment extras

Say you buy a $250,000 home with the help of a $200,000 30-year fixed-rate mortgage at 6.01%. Principal and interest on the mortgage will cost you $1,200.39 a month.

However, your monthly mortgage payments include more than just your mortgage. A significant part of the sum you send to your bank or mortgage lender every month covers your portion of your town or municipality's tax bill.

Property taxes are typically set by the town or county, and are represented as a dollar amount payable per $1,000 of assessed property value. If your county levies a tax of $12 per $1,000 of value, your $250,000 home would cost you an additional $3,000 per year, or $250 per month. Instead of paying $1,200.39 every month, you'll be paying $1,450.39.

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