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This happens everywhere. A seller or builder says you can own a home and pay X an month. Just like your Mom or Dad told you when you were younger... That sounds to good to be true. Well in this case it actually is to good to be true. The price they are stating is more than likely the P&I... aka the principle and interest payment for the home. The way it works today, the calculation is based on PITI. Principle, interest, taxes and insurance. You have to take into account that you must maintain insurance on a home, pay taxes and also any HOA (home owners association dues if applicable) on the property you purchase. Also, if you're not putting down 20%, you must pay PMI (Mortgage Insurance). So take this into consideration. You want to buy a $200,000 home. You are putting down 5%. Your calculation goes like this. $200,000 (sales price) - $10,000 (5% down payment) = $190,000 (loan amount). Taxes are assessed by the local governing municipality and range from 2-6% based on state. So, with out getting you confused or too technical. Here is a quick estimated evaluation of your payment.***Your local taxing authority will actually base your homes value lower than the sales price in most states, so this is just an example.190k house with 3% taxes = 5700 in taxes a year/12= $475Principle and Interest (5% interest) on 190k = $1019HOA a year = 1200/12 = $100Mortgage insurance (didn't put 20% down) = $127 a month ( FYI: will fall off once you reach 20% if you got a conventional loan, FHA as of July 1ST has permanent PMI)Insurance a year = 1000/12 = $83.33Payment a month = $1804.33Hope this helps!Contact a lender to get him to run numbers on homes of interest to see what the total monthly cost will run you. They will be more exact. Good Luck and Happy Hunting!
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