First time buyer – what to consider

[TheChaz]

Hi all. I’m a first-time home buyer just beginning to look for real estate in San Diego. I’m looking at condos, primarily in the North Park & Hillcrest areas (where I currently rent). I know my way around a TVM calculator, and I can come up with the mortgage payment on a loan with a given rate, down payment, etc.

I’m missing some info on the total cost per month to own property, however. I’m sure there are a bunch of little items I’m not aware of or don’t understand. Right now I’m factoring in the loan payment and HOA fees, but I’m in the dark about the impact of property taxes, for example – especially how they can be written off, and what that does to the total monthly cost.

Any help or advice would be much appreciated.

[SD Realtor]

Hi Chaz –

Many of us here are very familiar with central San Diego and there is a TON of inventory where you are looking. First off myself, and pretty much everyone here would recommend you wait to purchase because you will most likely see those Hillcrest, North Park, Normal Heights condos depreciate over the next couple of years.

If you are going to buy then I am hoping you will be keeping that property for several years, so you can essentially ride out the storm. Okay if it is a condo you are buying then make sure you count all of the recurring fees, mortgage payment, hoa, property tax, (supplemental insurance if you choose to purchase this) are the most common ones. Be diligent when reviewing the HOA docs. See how many increases they have had over the past few years including special assessments. Factor in the age of the building, the roof etc… Then anticipate an hoa hike based on those factors. Most likely throw in an a special assessment if you feel that is needed. Assume about 1.2% of the purchase price of the condo for property taxes based on that central location. Depending on your financing the property taxes will be impounded along with your mortgage payment (which I do not recommend) but you may have no choice. So if you by a condo at 400k then annual prop tax is estimated to be about 4200. You can deduct your property tax and mortgage interest for tax purposes but that doesn’t get realized until April of 2008.

Other facets of home ownership that you need to consider, your HOA may or may not cover water/sewer/trash collection. Most do cover it but some do not.

SD Realtor

[meadandale]

If you can calculate the tax savings of the write off for your property tax and mortgage interest deduction, you don’t need to wait until next april to ‘realize’ the savings. You can adjust your withholdings so that you can free up the money now.

[Author]

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