When you are trying to calculate how much home you can afford, there are some basic costs you need to think about. These include the mortgage costs, insurance costs, any HOA fees, and so forth. But there are some additional factors in many scenarios that can add more complexity to how you calculate your budget. Here are some things that are often overlooked when determining how much home you can afford.
- Moving states. Let’s say you are shopping for a home in a different state. Just moving states is going to impact your finances in multiple ways. Here are some things to consider:
- Property taxes: Be sure to check the property tax rate for where you will be moving. Try to estimate how high your property taxes will be, and think about how they might increase in the future as property values rise.
- Income taxes: Some states have dramatically higher or lower income taxes than others. For many homebuyers, this could free up or consume hundreds of dollars a month. This can make a huge difference in what you are able to afford. While you can calculate it in advance, it may be difficult to picture how it will impact your financial life until you have lived it.
- Sales taxes: Just as income taxes vary from state to state, so do sales taxes. This can also make a substantial change in what you can afford. Whether it is more or less dramatic than the income tax change depends on which state you are moving from, which state you are moving to, and your overall financial situation. It can be even harder to assess how different sales taxes will impact you, but you can at least look up the sales tax rate and try to estimate.
Good news: One reason Florida is a popular state to move to is that it is one of a few states with no individual state personal income tax. If your state income taxes are high where you live now, moving to Florida could end up saving you quite a bit of money you could put towards a new home. The combined sales tax rate usually ranges from around 6% to 8% depending on the county. So, account for that too as you calculate how much home you can afford.
- Household structure changes. Maybe you plan to live in your new home with whomever you live with now. But that might not be the case. There could be immediate or future changes you are planning after you move house. These will impact your financial situation. Here are some examples.
- You may plan to have children later.
- You might be gaining or losing a paying roommate.
- You might be gaining or losing a dependent.
- You could be divorcing your spouse.
Some of these life changes will make your finances tighter. Others may do the opposite. If you gain a dependent, you may not be able to afford as much home. On the other hand, if you lose a dependent, or gain a paying roommate or partner, you might be able to afford more home. Predicting the exact impact on you finances can be a challenge. If your finances are entangled with someone else’s now who will not be living with you in the future, it can be hard to understand where all your money is going and what resources will free up after that person is out of the picture. Likewise, if you are bringing someone new into your home, it can be hard to know how much they will drain or enhance your finances.
- New utilities providers and plans. Depending on how far you are moving, you might need whole new providers for your utilities (electric, internet, etc.). Look up what utilities providers charge for the new zip code, and account for that when you figure out your budget for your new home.
- Lifestyle changes. A big move to a new area can come with some lifestyle changes. For instance, you might have a longer or shorter commute to work, or switch to using more public transportation. There might be different activities that fill your weekends or nights. You could have a different local grocery store, and so on. All of these lifestyle changes can impact your budget. You’ll need to try and estimate in advance whether they will drive your monthly expenses up or down, and by how much.
- Maintenance and repairs. One more thing that is hard to predict when you buy a home is how much you will need to budget for maintenance and repairs. The standard advice is to save between 1-3% of your home value per year to put toward maintenance and repairs. You probably won’t spend that every year. But there will be bad years where you end up with very expensive repairs. During those years, you may end up having to use up everything you’ve been saving in that maintenance budget for the previous years. Keep in mind that a home in a low cost area may have a lower market value than an equivalent home in a high cost area. But both homes may require the same repairs, and similar repair budgets. This can add to the challenge of trying to budget correctly for home maintenance.
Also, if you buy a very cheap old house, you might wind up needing a much higher percentage of its value to put toward repairs.
Buy a Home in Florida
Premier Lending Corp is based in Cooper City, and can help you buy a home anywhere in FL. To get started, please call us at 954-840-8811 to schedule your consultation. We can help you figure out how much home you can afford, and walk you through the mortgage application process.
We can also connect you with competitive mortgage rates. When you pay less interest, you can afford more home, or put more money toward your savings and investments.
