My rich uncle would say, Even if I purchased my daughter a $1M home, she would still not be able to afford it because of the real estate tax. Unfortunately, one of the most overlooked expenses for first time home buyers is they will have to pay. With the high home prices these days, the amount you pay can be significant; and therefore be the deciding factor whether or not you can afford to purchase a home or not.
What is Real Estate Tax? Real Estate taxes, also known as Property Taxes, is the amount of tax you must pay to your county. The funds are usually used for schools, police, roads and other municipal services. How do I calculate the amount I owe? The amount you owe is based on an assessed value of your property. The county then factors in some calculated formula to establish your property tax amount. Each state can vary. To get a quick ballpark figure, you multiply your home purchase price by 1.2%. For example, if you purchased your home for $100,000, then expect to pay approximately $1,200 per year in property taxes.
You can also use a Real Estate Tax Calculator. Be forewarned however, that the property must be recorded with the new assessed value before you can use the Real Estate Tax Calculator. How do I pay my property taxes? You can write a check to your county tax collector. You can pay in two installments, December and April, or the entire tax bill in December. Another way to pay your property taxes is through an impound account. Before you close on your loan, ask your loan agent if the mortgage company offers an impound service. If your loan is already closed, call your mortgage company to see if they can set one up for you. Your monthly mortgage payments will be higher to include your property tax obligations. With an impound account, you are virtually paying your property taxes monthly (the mortgage company collects the extra payments and pays them for you at the end of the tax year). This is a great option if you can not afford to pay a large lump sum.
As mentioned, the property tax can be the determining factor as to whether or not you are going to buy a house. Make sure to ask the loan agent if the estimated monthly mortgage includes the real estate taxes or not. If it doesn't, and you aren't aware that it doesn't, you might be in for a surprise when they are due.
Steven Mason has been investing in real estate for over a decade. You may read more about insights to real estate and investment at his website at http://www.gurucs.com/
Source: www.articlesbase.com
