"I found some Dunedin real estate I'd like to buy, but can I afford it?"

If you're thinking of buying a house, condo or townhouse in the near future and you've got an idea of what you want your monthly payments to be, it's time to figure out how high you can go on the price of the properties you'll be looking at.

In this article I'll go over where you can get the information you need to help determine the maximum price you can pay for a property based on what you have in your monthly budget for it. This also includes an explanation of different expenses that are added in to your monthly loan payment which you need to be aware of.

Monthly Budget

First let's look at how much you've figured out you can spend monthly and see if that will really work. I realize you probably already know how much you can afford each month but we have to make sure that you've included all the expenses you'll have with your new home in the monthly amount.

If you've determined how much you can afford on a monthly basis based on what you currently pay for rent each month or based on what payments would be on a mortgage loan, you may not realize the other expenses you have to figure in for your monthly amount.

There is the monthly loan payment (principal and interest) and that is simple to figure out. It is based on the amount of the loan (cost of the property minus your downpayment), the interest rate and the length of the loan period.

In addition to the principal and interest, you will also have a monthly amount added by the lender to cover what your property taxes are estimated to be and 1/12 of your annual premium for homeowner's and, if needed, flood insurance.

These 4 things - Principal, Interest, Taxes, Insurance make up the monthly total you will be paying to your lender (also referred to sometimes as PITI).

If you put less than 20% down for a conventional loan or get an FHA loan, you will also have a monthly amount added for Mortgage Insurance.

And if there is a mandatory homeowner's association, condo association or maintenance fee, that may also be added to your monthly payment. But if not added in to your loan payment, you will still be responsible for paying it separately and should figure it in to the monthly amount you will be paying for your budget.

So in figuring out how much you will be paying each month you have to include:

1. Principal and interest - find out from your mortgage broker or loan officer what your interest rate will be. They can tell you what your monthly principal and interest amount will be for different loan amounts, or you can go online and use a mortgage calculator to determine this if you know the interest rate, loan period and amount you will be putting down.

2. Taxes - In Dunedin, the 2010 tax rate is $19.4994 per $1000 of taxable value. The taxable value may differ from the purchase price, but to get a ballpark figure to help you in determining how much you can afford to spend, just take the price you are thinking about as your top price and multiply it by.0194994 to get an approximate idea of where your annual taxes might be.

3. Insurance - Dunedin does have some areas that are flood zones which will require flood insurance but most areas do not. Call your insurance agent to get estimates for home insurance and for flood insurance if you are looking at areas that might require it. They may be hesitant and state that they would have to know more about the house, but just see if you can get them to give you a range.

4. Mortgage Insurance - If you are getting a loan where this will be required, ask your mortgage broker or loan officer how much this will be each month for the top price you are looking at paying.

5. Homeowner's Association/Condo Association/Maintenance fees - You'll really only be able to find this out once you start to look at listings. Once you get the information for the above 4 points you'll see how much room there is between that total and your budgeted monthly amount. You may need to adjust the top price of your range to allow more room for these fees.

Now let's look at a made-up example to give you an idea of how this might work (the numbers used are not from a real property or based on what actual taxes or insurance would actually be).

The highest amount you can pay monthly for your new home is $2670.

You've spoken with a mortgage broker and are prequalified for a loan up to $400,000 at 6% interest with a 20% downpayment.

The home you want to buy is listed at $380,000 but your realtor feels that home is overpriced and that they can get the seller to accept an offer for $360,000.

There is a $600 a year mandatory homeowner's association fee.

You check with your insurance agent and find that your annual homeowner's premium would be $3600 and that you do not need flood insurance.

You will be applying for a Homestead Exemption for your property taxes.

Your monthly Principal and Interest will be $1726.71 on a loan of $288,000. $288,000 is the amount of the loan on a $360,000 home where you put 20% down. The monthly payment is based on a 30 year $288,000 mortgage at 6% interest.

Property taxes are estimated each month at $587.98. This is based on an multiplying the purchase price of $360,000 by the Dunedin tax rate of.0194994. (The actual amount of tax paid monthly at first may be lower based on what the previous owner paid in taxes but you should be prepared for what the taxes may increase to in the next 1-2 years rather than have that come as an unwelcome surprise sometime down the road.)

Homeowner's Insurance is $300 a month; and the monthly Homeowner's Association Fee is $50.

So your total monthly payment (PITI + Assoc. Fee) would be $2664.69

Now you've been able to determine that even though you are approved for up to $400,000 you would need to keep the price of any property you buy to a maximum of $360,000 to keep within the monthly amount you can afford. Of course, this may change if you choose a different property that requires flood insurance or if it has a higher or lower homeowner's or condo association fee.