COLUMBUS – Buying a home is one of the largest purchases many individuals will ever make, that means there’s also the potential for this experience to become one of the largest headaches, especially if consumers aren’t prepared. To help ensure Ohioans are equipped with the information they need to fully understand the full financial commitment involved with buying a home, the Ohio Department of Commerce Division of Real Estate and Professional Licensing and Ohio Department of Insurance have partnered to break down these costs before someone enters the housing market.
Knowing the various components that contribute to a monthly mortgage payment is key to making informed financial decisions and avoiding unnecessary financial strain.A typical house payment consists of the following elements: principal and interest, escrow fees for homeowner’s insurance, property taxes and private mortgage insurance (PMI), which protects the lender if you are unable to make payments on your loan. When combined, these elements can significantly impact overall affordability, especially when compared to just looking at the cost of the home itself.
“We’ve recently heard from a number of real estate agents that homebuyers have had to back out of real estate agreements in the final stages due to surprises with costs,” said Daphne Hawk, Superintendent of the Division of Real Estate and Professional Licensing. “Buying a home is one of the most significant financial commitments many people make. Having a full and complete understanding of the recurring costs, like property taxes and insurance, helps homebuyers avoid potential surprises and ensures they only commit to what fits their budget.”
Interest rates and varying tax and insurance rates across Ohio mean potential costs can fluctuate greatly from one area to another. Prospective homebuyers are encouraged to assess how each factor affects their payment and ensure their monthly housing costs don’t exceed 30 percent of their gross income. This benchmark can help to maintain financial stability and protect against overextending personal budgets.
Tips for Calculating Monthly Housing Costs
The Ohio Department of Insurance and the Ohio Department of Commerce offer the following tips to help buyers research and estimate their true house payment:
By taking these steps, homebuyers can confidently determine what they can afford and avoid taking on a commitment that risks their financial security. The Ohio Department of Insurance offers a range of educational homeowners insurance information, including a guide to homeowners insurance, available at insurance.ohio.gov. Homebuyers can also learn more by accessing the Ohio Department of Commerce’s Homebuyers Guide here or by visiting Real Estate & Professional Licensing (REPL).
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