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When You Buy a House What Do You Pay Monthly?

With rental prices in Central Florida rising at a faster rate than the typical renters’ paycheck, more Floridians are realizing the best way to control the cost of living is to own a home. Current low interest rates make the prospect even more attractive. Yet, many first-time buyers aren’t aware of the many expenses involved in homeownership. Here is a comprehensive list of monthly house payments every new purchaser in Florida should anticipate.

Biggest Monthly House Payments: Mortgage

Clearly, your monthly mortgage payment is the elephant in the room. As the biggest expense tied to homeownership, every buyer wants to know their potential payment. The National Association of Realtors estimated $272,500 to be the national median price for a home in 2020. Assuming a 10% down payment, that calculates to $1,700/mo on a 30-year, 3.29% fixed-rate mortgage and $2,276/mo over 15 years at a 2.79% fixed rate.
The average first-time buyer purchasing a $200,000 home on the same terms nationally can anticipate monthly payments of $1,307 and $1,760 respectively. In Orlando, the typical mid-priced home sells for $292,716. Before deciding if any payment fits within their budget, however, every home-buyer should factor in the other expenses. Keep in mind that refinancing is an option, too and that most homeowners don’t stay with their original loan for more than ten years.

Basic Utilities

Electricity

In 2019, the US Energy Information Administration released a report stating the average Florida resident paid $126.44 for electricity every month. With the need for air conditioning, it shouldn’t come as a shock that is 13% higher than the national average. Additionally, homes consume more electricity than apartments. They come with more appliances, exterior lighting, an automatic garage door opener, and, sometimes, a pool filter.

Other factors affect your monthly bill. The age and condition of the home matter, as do the age, condition, and types of appliances. The efficiency of the HVAC unit is critical. One that performs poorly will increase your bill unnecessarily. Switching from incandescent to LED light bulbs significantly reduces your power consumption. You can find apps online that estimate electric bills and power usage based on the home address.

Water

Like electricity, water and sewage bills vary depending on certain factors. How many residents are there? How much lawn and garden is there to water? How many cars to wash? Is there a pool or jacuzzi? In Orange County, your electric, water, and sewage bills are bundled by the Orlando Utilities Commission, whereas other Floridian municipalities may bill separately.

According to the Orlando Sentinel, a typical household in the region uses 6,000 gallons of water and wastewater services each month. Billing ranges from $67 to $95 depending on the specific location and utility company.

Garbage

The Orlando Solid Waste Division provides curbside pickup for solid waste, recyclables, and yard waste. They will also schedule free pick-up for large items, such as old washers, dryers, and dishwashers that do not fit in your waste bin. According to Orlando.Gov, the standard fee for monthly trash service is $19.28

Cable And Internet

In Winter Park and Orlando, Spectrum and Xfinity are the two cable television providers. Service plans from the two companies range from $30 to $153. Additionally, DIRECTV offers satellite television, while AT&T and CenturyLink feature IPTV and Fibre TV services. Each company also offers internet service. Summit Broadband is making inroads in the area, providing cable and internet service to roughly two percent of households in the two cities.

Maintenance Costs

Lawn Care And Landscaping

One major transition for new homeowners is the difference between watering a few houseplants and caring for front and backyard lawns and gardens. Thankfully, dozens of reputable lawn service and landscaping companies in the greater Orlando area can ease your burden.

Services include regular mowing, tree and hedge trimming, fertilizing, and planting and maintaining flower beds. Cost depends on services rendered and square footage. According to Manta.com, the price range for simple mowing services in Orlando ranges from $11 to $55 monthly.

Sprinkler System

Most Orlando area homes have irrigation systems in place. If the home you purchase doesn’t, it’s another expense. The typical cost for a four-zone system that covers the average yard is $3,000. It’s a good investment in terms of time-saving and preserving property value. Like many other home upgrades, it can be financed and paid monthly.

Pool Cleaning

If your new home has a pool, but your schedule doesn’t allow time to both enjoy and maintain it, you may opt for a cleaning service. Single visits range from $20 to $30, but you can save as much as 15% by paying monthly for weekly visits. Professional pool cleaners keep your PH balance optimal, skim away accumulated debris or algae, and, for additional fees, winterize your pool, and inspect, replace and/or repair pumps and filters.

Protecting Your Investment

Home Security

When you buy a home, you naturally want to protect it. There are several home security services on the market. Features include contact alarms for windows and doors, motion sensors, motion-activated cameras, and 24-hour access to live operators if an emergency does occur. Many systems can be controlled via your smartphone or laptop while away from home, which is handy when you’re expecting a package to be delivered.

The major cost is installing the system. Typically, installation charges range anywhere from $500 to $800. Charges do not include local permit, inspection, or building fees. Applicable Orlando, Orange County, and Florida sales taxes are also extra, as is the roughly $100 surcharge if circumstances require a general contractor. Most companies allow the homeowner to finance the charge. Once the system is installed, monthly monitoring costs tend to fall between $15 and $30.

Homeowner’s Insurance

Overall, Florida weather is beautiful. New residents flock to the state annually. Unfortunately, with thousands of miles of coastal area, Florida is also subject to catastrophic weather. Situated mid-state, Orlando is comparatively safe from hurricanes and tropical storms, but only if you understand that “comparatively” is the operative word. Beyond insuring your home and belongings against fire, lightning, and theft, it’s imperative that you protect yourself against damages from flood and wind.

For all that, BankRate.com reports that the average annual home insurance premium in the state is $1,353, only $40 above the national average. Again, because Orlando is centrally located, slightly mitigating risk from torrential storms, local homeowner premiums tend to be lower than those in coastal cities.

Community Costs

Homeowners And Condo Association Fees

If you purchase a residence within an HOA or Condominium Association’s jurisdiction, the bad news is you will be required to pay a regular fee. Depending on the association, it is collected either monthly or quarterly. The good news is the fee can cover expenses such as trash collection and landscaping, mitigating and sometimes eliminating other monthly expenses listed above.

Association fees also cover costs for regular maintenance of community buildings, staff, security, and signage. Fees vary according to the size of the association’s jurisdiction, number of members served, and services provided. It’s important to know that associations can also assess much larger one-time fees for larger projects such as roofing, painting, and other upgrades approved by the majority of members.

Property Taxes

Whether you live in an association or independently, property taxes are unavoidable. Municipal, county, and regional governments derive the greater part of their revenue from property taxes. Your contribution funds various services including, but not limited to public schools, police, fire, and emergency services, and maintenance of streets and parks. Orange County’s median property tax is $2,152 per year.

County property taxes are assessed on a millage system. They’re prorated according to property value. Lots with greater value pay higher rates. Again, the good news is that the system has safeguards preventing your taxes from increasing more than three percent annually. When a home is purchased, up to six months of taxes can be collected in advance. Beyond that, they are collected yearly, although the City of Orlando does permit qualified residents to pay quarterly installments.

Improving Property Value

Most of the monthly expenses covered to this point are either necessary or commonly taken on by homeowners. Beyond that, homeowners may wish to increase their property value by renovating or upgrading the house or land. There are several projects that can be undertaken to achieve that aim. Each involves a significant investment, although some cost noticeably more than others. The one thing they all have in common is that the expense can be financed monthly.

Here are just a few possibilities to improve the value of your home.

Roofing

Repairing or installing a new roof can lower your electric bill, prevent water damage and provide greater protection from inclement weather.

Fencing

Erecting a new fence around your property can provide additional security and improve the appearance of the property, thereby raising its value.

Decking

Installing a new deck in the backyard not only offers your family additional space to enjoy their new home, it makes the home more attractive to potential buyers when you decide to sell.

Paint

It’s amazing how a fresh coat of paint can make your house stand out in the neighborhood.

While the fact is that homeownership is a better long-term investment than renting in terms of a lower, recoverable cost, there are many monthly house payments attached to that investment of which new owners should be aware while planning their purchase. A qualified realtor can help. Contact David Dorman if you’re looking for your first home in the Orlando area.

How Much Money Do You Need Upfront to Buy a House?

According to a study published on January 22, 2020, rent in Orlando increased 39% from 2010 to 2019. Year-over-year rent prices are also exploding in other Florida cities. If you’re ready to break the cycle of paying more and more every year to an unresponsive landlord, you need to own your own home. Here’s a look at how much money you may need upfront to buy a house, including the down payment on a home you may need.

How Much Money Do You Need Upfront to Buy a House? 

How much money you need upfront to buy a house depends on many factors, including the price of the home you’re buying, the location of the home you’re buying, and the type of mortgage you’re taking out if you’re not paying cash.

As a general rule of thumb, you will need to save up a down payment on a home plus roughly 2% to 5% of the purchase price. Also, depending on your lender, there may be other cash requirements. In other words, you should have the cash to cover 2% to 25% of the home’s purchase price. Let’s take a closer look at the factors affecting how much money you need upfront to buy a house.

Down Payment on a Home

Depending on the type of mortgage you’re getting, your down payment may be up to 20% of the purchase price of the home. It is often recommended that homebuyers put a 20% down payment on a home because private mortgage insurance (PMI) must be paid if they don’t. The cost of this insurance depends on the base loan amount, the mortgage term, and how much of a down payment was put down.

It typically ranges from $30 to $70 monthly for every $100,000 borrowed. The duration of PMI also varies. Sometimes, PMI must be paid for 11 years. In other cases, PMI must be paid for the entire mortgage term. Some lenders may automatically drop your PMI charges when you have paid off 78% of the loan. Other lenders require a formal letter when your LTV drops to 80%. Make sure you understand completely how your lender handles PMI.

FHA Loan

FHA loans are incredibly popular because they only require a down payment of 3.5%. To qualify for an FHA loan with a 3.5% down payment, you need to have a FICO score of at least 580. You must put down a 10% down payment if your credit score is lower than 580. However, recently, more lenders are requiring a minimum credit score of 620 to 640. Here are some other FHA loan requirements: 

  • You are purchasing a primary residence
  • You have documented, steady employment and income history
  • Your home has not been foreclosed on in the last 36 months
  • You have a debt-to-income ratio no greater than 50%

If you want to take out an FHA loan and don’t want to pay PMI, you only need to put down 10% of the home’s purchase price. If you don’t put down at least 10% of the home value, and you want to stop paying PMI, you can refinance your home. Your lender will charge you fees to originate the loan, but this may make the most financial sense if you have a much higher credit score or your LTV decreases significantly.

VA Loan

VA loans are also incredibly popular because you can get a VA loan without putting any money down if you present a Certificate of Eligibility (COE) to your lender. This COE shows your lender that your service history and duty status qualify you for a VA direct or VA-backed home loan.

However, you may have a debt-to-income ratio no greater than 41% to qualify for this type of loan. Also, while the VA does not require a minimum credit score, your lender might.

USDA Loan

If you don’t qualify for a VA loan, you may benefit from taking out a USDA loan. This loan program allows zero-down financing and locks you into a fixed interest rate. People often make the mistake of taking out a variable-rate loan and end up with an interest rate so high they can’t afford the monthly payments. The USDA also does not require a balloon principal payment, and there are no prepayment penalties for rural USDA loans.

What many people don’t know about USDA loans is suburban home purchases can also be made with a USDA loan. You may think the area you want to purchase your home in won’t qualify, but 97% of the country qualifies as rural or suburban. Check the USDA’s eligibility map, and you may be surprised that the area you’re thinking about qualifies. Besides location, here are some other loan requirements: 

  • Salary no greater than 115% of the median local salary
  • Minimum credit score of 640
  • Upfront mortgage insurance of 1%
  • Annual 0.35% fee paid monthly
  • Escrow including annual homeowners insurance
  • Escrow including annual real property taxes
  • Closing costs (may be gifted by friends or family members)
  • Primary residence purchase

Closing Costs

Typically, closing costs range from 2% to 5% of the purchase price of the home. Among the closing costs you may have to pay are an origination fee, application fee, underwriting fee, and processing fee. These are all costs that may be paid to the mortgage lender. However, third-party fees may also be necessary. For instance, you may be required to pay for:

  • The county recording fee
  • An appraisal
  • Escrow fees
  • Title fees
  • Title insurance
  • A credit report

You may also choose to have a lawyer present when you close on your home, and the municipality of the residence may charge a fee. If you’re worried about out-of-pocket costs, ask the seller if he or she will pay for the appraisal. You can also speak to your lender about alternative loan options or a lender credit to reduce your out-of-pocket costs.  

Property Taxes

You should be prepared for your lender to collect between four and six months of property taxes upfront. In some cases, a full year of real property tax and homeowner’s insurance is required. On average, counties in Florida have a 0.98% real property tax rate. If you’re purchasing a $300,000 property, and you need to pay half of the annual property tax upfront, you should have $1,470 set aside assuming a 0.98% real property tax rate.

Be advised, you can view the property tax bill for the home you would like to purchase by searching by address on the county’s Treasury website. When you’re shopping around for lenders, make sure you ask how much of the real property tax must be paid upfront.

Earnest Money

You also need earnest money to purchase a home. Earnest money is proof that you are truly interested in purchasing the home. If the seller accepts your offer and you sign the contract, the earnest money will be sent from the escrow account to the seller. A certified real estate agent can advise you on how much earnest money you need based on the current market.

In some cases, only a couple hundred dollars will be required. However, in hot markets, you may need earnest money that is closer to 1.5% of the home’s purchase price. In other words, if you are purchasing a $300,000 home, you may need around $4,500 sitting in an escrow account that will be applied to your down payment if the sale goes through. Also, your real estate agent can help you negotiate a lower earnest money deposit.

Cash Reserves

To qualify for a mortgage, you need to have cash reserves in investment or savings accounts. This money must be separate from the other costs of home buying, such as closing costs and a down payment. Lender requirements vary, but you should expect to need up to six months’ worth of mortgage payments. If your mortgage will be backed by Fannie Mae or Freddie Mac, you will need at least two months of cash reserves.

For instance, if you must pay $1,800 per month for your property taxes, PMI, HOA dues, homeowners insurance, loan principal, and loan interest, you should have $3,600 to $10,800 in cash reserves. Note, neither the FHA nor the VA require cash reserves, and the cash reserve requirement may be waived if your FICO credit score is at least 740.

Home Inspection

Before you make an offer on a home, you should get an independent home inspection. An appraisal only determines the value of a home. It does not guarantee there are no structural or safety issues that the current homeowner must resolve before you make an offer.

Homeownership is not impossible. If you have a credit score of at least 580, you may qualify for an FHA loan. You can get the keys to your home with only 5.5% to 8.5% of the home price saved up. If you’re ready to start looking for your first home, contact David Dorman, a real estate agent certified to sell homes in over three dozen Florida cities.

Buying and Selling during a pandemic

We are in uncharted territory in many areas. As a broker in Central Florida, I am constantly looking at trends and issues that affect the home sale process. While I would like to say. Things are steady right now, things are not. It’s not all gloom and doom depending on who is buying and who is selling.

July 2020

July has come and gone and now it’s time to wind down the Summer as we prepare to start up school again. How and where that happens is still up for debate. Regardless, this Summer and real estate sales have had their shares of ups and downs. Here are my personal observations. There are still plenty of first time buyers out there.

A few of my favorite things

Owning a home is a great thing and after a while, once you get settled in, you really start to make things your own. Personally, my improvement strategy has been to pick one thing a year I want to do and vet it properly for cost etc. before doing anything.

Exciting new program!

David Dorman

With so many non brokerage companies out there making cash offers on homes, it was only a matter of time before the actual professionals got involved and improved on it! Enter REALSURE! Realsure take a unique approach to the cash now home sale process.

Instead of just offering a seller a price, usually lower than market value and then taking on additional charges and fees, Realsure has partnered with REALOGY, which owns major brands such as Coldwell Banker, ERA and our company, CENTURY 21. Once certified, the agents can procure a cash offer for the seller, but unlike other companies who demand you respond to their sale within a few days, Realsure allows the seller to think about it for up to 45 days. This allows the seller to actually list the home on MLS, which will usually result in a higher offer and lower transaction fees, however it allows the seller to have a back up plan if the market is not going their way. We could not be more excited to offer this to our clients! Need more info? Give us a call!

Welcome to 2020!

I’m David Dorman and THIS…IS 2020! It’s time to start a new year and I could not be more excited! There are some major changes coming down the pike for 2020. The biggest thing I want to share this month is that in March,

December Newsletter

We made it! 11 months of real estate and only one left in 2019! Now that the year is over, let’s take a look and see how we did. Looking at my personal sales data, I can see that overall, inventory was lower, but prices were higher.

What your agent doesn’t know might hurt you..

Let me tell you a few things about getting your real estate license. I’ll start with a questions. How long does it take to get your real estate license? How many hours of sales training must you have before you can pen your first deal?