Homeownership is one of the greatest accomplishments most people wish to achieve. As a potential homebuyer it is a good idea to look beyond just the success of buying your home. While getting the down-payment and lending are necessary to begin your home search, many buyer’s forget to look into what comes after the home purchase. For starters, when looking for the ideal home spending the full amount of what your lender says you qualify for isn’t always the best decision. Buyer’s need to look at their personal income and budget very carefully after getting an estimated monthly note from the lender. For example check the insurance premium on the property you are considering BEFORE making an offer. Insurance coverage is required by lenders and is usually escrowed into your monthly note payment which can significantly increase the monthly note once added to the principle and interest payment of the loan itself. So if by chance your home is one that has a annual premium of say $1200 you can count on the added amount of your principle and interest having an additional $100 placed into you monthly payment to cover your annual insurance premium upon its renewal date. Escrowing your insurance is a good thing in that it ensures that each year your insurance is current and doesn’t lapse which could be detrimental if it isn’t renewed on time annually. There is no harm in asking the seller for an average cost of their monthly utilities and how many people this covers in their household so you can adjust the usage amount based on the size of your family in comparison. In most cases buyer’s look forward to the tax deduction that is currently allowed when filing personal taxes, on the interest paid on their loan as well as the taxes paid annually on the property. However, what many buyer’s miss is the important factor of property tax increases that usually occur within the first year of ownership. To illustrate, Mr. Bling Buyer purchases a home at a good price of say $100,000 which is at the top of his budget. It is to be understood that once appraised before the purchase the house at least was valued at the selling price. The previous owner or seller of the property has an accessed tax value of say $75,000 and is current on all taxes at the time of sale. After a year, the buyer is all settled in and enjoying their new home, and unexpectedly they receive a notice from their mortgage lender stating that their escrow amount was $1800 short for the assessed value of their home by the tax assessor’s office. In most cases the lender will pay the taxes but send you the figure of the amount you were short and request that you make the payment back to them to get your escrow back on track with positive numbers. What this means is you will need to pay this amount as well as see your mortgage increase by a significant figure to ensure you are prepared to pay the full taxation on the newly assessed value that you purchased the property for on the upcoming tax bill. In some cases the lender will suggest the deficit amount be paid along with the additional amount you could pay if you wish to avoid your monthly note from increasing. In most cases a median income household doesn’t have enough liquid assets to afford to pay such a lump sum at one time. Hence inevitably when this occurs the monthly note is increased. This is why it is important to have your real estate agent assist you with calculating the potential tax amount annually before buying a property to make sure that enough room is left for you to continue to afford your monthly mortgage payments with the added property tax potential increase after the new sale price assessment. Keep in mind that in no way shape or form is your agent a qualified tax advisor, but most agents such as myself are fully capable of computing the estimated tax levy of a property based on it’s final sale price. On occasion if the increase isn’t too much the homeowner’s filing for homestead exemption may balance it out IF the previous owner shared the same tax status before selling the property. On the other hand if you are not residing in the newly purchased property as your primary residence then most likely you will not be able to claim the homestead exemption and have to pay the full tax amount on the property. In many instances agents will simply provide you with the current tax record on the property which is based on the current assessed tax amount not the newly purchased amount so make sure this is not the figure you are given when asking your realtor what the potential tax burden annually could be on a property you are considering. Just how important is this tax matter?? For some families an increase of as little as $30 per month on their mortgage can cause a strain on their budget. Unfortunately in most cases the increase in tax escrow is more than just $30 monthly since most escrow accounts require a minimum balance of the percentage the escrow account must be to stay ahead of the escrowed bills to be paid. So it is VERY important if you wish to ensure the ability to continue to pay your mortgage and remain in good standing with your lender so as to avoid a potential foreclosure circumstance. There is however one instance when tax assessment does not increase the tax billed amount……….IF the value of your property drops which is NOT a good thing. If however it does, every consumer does have the option to by written request have the tax assessors office re-evaluate their tax burden for it to be adjusted accordingly when a decrease in value occurs. Just a heads up! The assessor’s office is NOT going to lower the taxes without a formal written request contesting the current tax evaluation but they will increase it if the value goes up with no adjustment request required. If this occurs and you wish to contest it is a good idea to have a copy of an appraisal that shows the diminished value as proof of your justification in requesting lowered property tax rate on the property. In many states, doing so will actually place a hold on the increase of taxes on your property until the matter has been reviewed by the assessor’s office or for a minimum number of years in some cases placing a “freeze” on your property tax from increase. If you are considering buying a home in the near future give me a call with questions you may have on preparing to make a well educated purchase.

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