Why The Smartest Buyers Shop For Homes By Monthly Payment Instead Of Listing Price

Homes for sale cost more than their listing price. There are also costs for homeowners insurance, real estate taxes, and, in some communities, dues. Think about your budget as a monthly payment and not a sale price.

June 09, 2020 by Dan Green

👋 Personalize this mortgage content

Update your homebuying preferences to customize this article. Subscription not required. Privacy protected.

What type of house do you think you'll buy?

How long do you want your loan to last?

What's your preferred monthly payment amount?

First-time home buyers spend up to two years looking for their first home. One of the first things they learn is that – unless you’re paying cash! – you should never shop for homes by sticker price.

For Sale prices aren’t what homes cost.

The cost of a home is based on:

  1. The listed price for the home
  2. The real estate tax bill for the home
  3. The cost to insure the home with homeowners insurance
  4. The size of your down payment, which affects your loan size
  5. Today’s mortgage rates, which affects how much interest you pay

Also, if you’re buying in a condo building or planned community, you’ll care about a sixth part – the monthly dues payable to the community.

None of these factors get captured in a home’s For Sale price. The better way to shop for homes is to shop by monthly payment.

Let’s look at two fictitious single-family homes for sale. They’re both for sale at $216,000 and built by the same builder. The properties feature identical floor plans and finishes, and are very much the same in every possible way.

The two properties are even in the same neighborhood.

The only difference between two properties is that they’re on different streets, which, coincidentally, puts the two homes within separate census tracts.

Suddenly, these two listings – which come with identical floorplans and each sell for $216,000 – have very different costs to own.

The first home is one block closer to the nearest police and fire stations, and in a tax-advantaged census tract based on average resident income and minority concentration. The second home is farther from police and fire stations, and its census tract is not tax-advantaged.

Should you buy the first single-family home , you’d get access to:

  • Mortgages with subsidized, below-market interest rates
  • Lower real estate tax bills
  • Less expensive homeowners insurance because of proximity to emergency services

The second home gets none of those benefits and, therefore, costs more money to own despite having the same sales price.

You can’t shop for homes based on a listing price. It’s your monthly budget that matters more.

Are you a first time home buyer?

Let us know if you’ve done this before - whether you’re a seasoned pro or buying for the first time. We’ll share the perfect information with you as you need it.

👋 Personalize this mortgage content

Update your homebuying preferences to customize this article. Subscription not required. Privacy protected.

What type of house do you think you'll buy?

How long do you want your loan to last?

What's your preferred monthly payment amount?

More than 25,000 home buyers have customized their content

Sign up to customize yours

Already have an account? Log In