Don't Be Fooled By Listed Prices Alone

   With so many concerns regarding affordable mortgage payments, people are not always apt to consider the full facts when home shopping. It is imperative to take into account not just the listed price, but the property taxes as well.

There are several sellers who list or slash their home price partly due to the fact that the home may not be affordable if listed at Market Value. If the property taxes for the home are high, your mortgage payment with impounds account will reflect that higher tax. If you choose your loan without the impounds, or even pay cash for the home, you can still hurt yourself trying to keep up with those higher taxes.  When considering a listing you must account for possible Mello Roos Bonds, Homeowners Association Fees, and/or Special Assessments on top of the county tax.

For example:

Purchase Price @ $320,000 x 1.9% Prop. Tax=  $6080 tax per year.

Purchase Price @ $375,000 x 1.3% Prop. Tax = $4875 tax per year.

This amounts to a difference of $1,205 every year! What can your family do with that extra $1000 every year? Most people seek a 30 year fixed loan, which means you could end up paying approx. $36,000 more when purchasing a lower price with a higher tax! (Think about how much this will be reflected in mortgage payments.)

    Now and days most shoppers are familiar with Homeowners Associations and City/County Assessments. However not everyone knows enough about Mello Roos taxes which are the most common. For those not familiar with Mello Roos let me explain:

    A Mello Roos Bond is basically a second tax added to the county's usual tax assessment. (You may contact the County Tax Assessor for a brochure.) When property is purchased we need services for police, fire and ambulance protection as well as school zoning, etc. The Community Facilities District (CFD) charges for these services, and if it is not paid in full before, or soon after the home is sold, it reverts to a Mello Roos Bond. It is then paid at the same time as your normal tax bill and can last up to the life of your ownership. If you sell the home without paying the Mello Roos Bond first, it reverts to the next owner. If the Mello Roos Bond is not paid, the CFD has the right to foreclose on the property!

  When you apply for a home loan, the lender/investor is not only interested in your ability to pay the principal balance and interest, but you must also be able to afford those tax payments every year.  Remember to always inquire about the property taxes when searching for a home, and educate yourself to be a smarter shopper. Don't get taken advantage of.

Other ways to try to help yourself when shopping:

·   Find out the total included features value, the comparable market value, and the property taxes. You may find yourself looking at a low priced home with incredibly high taxes, and very little features.   Also, try to shop around for your home loan as much as you can. You can obtain your own "FULL" credit report for a fee on-line, and use this within 2-3 months to shop for a loan. Even if you MUST submit to their Lender (which is a normal requirement) a good seller will be open to allowing you to get the best loan for your dollar and still incentives. Be careful---- if the outside lender you choose does not close escrow before the estimated date, you may incur penalty charges. Be sure to find out about any penalties, and let your lender know about them immediately when you apply for the loan.

·   You may not always be able to get into your dream home. Just make sure that you are trying to meet your family's needs. Do not accept a home, or a loan if you must over stretch to make the payments.

·   Option ARM loans are a good choice if you know you will be increasing your income in the near future. They are not a wise choice if you want to get in at low payments quickly, and then hope to refinance later. There is no guarantee you will have enough equity to make changes later.

For more information contact the local county assesor. You may also contact me anytime if you have any questions.

Good Luck with your shopping. Happy Hunting!