CHAPTER 5 HOW LOWER TAXES LET Y AXES LET YOU BUY MORE HOUSE FOR THE S OR THE SAME MONTHLY COST This chapter is often the moment where things click for homeowners. Once you see how taxes influence monthly affordability, everything becomes clearer. Many people think that moving to a better town or a larger home will automatically cost more. But in New Jersey, that is not always the case.
Sometimes, moving to a better town will cost you less.
How Lenders Look at Monthly Payments
When a lender evaluates your ability to buy a home, they look at your total monthly payment, not just your mortgage.
Your total monthly payment includes:
• Mortgage principal • Mortgage interest • Property taxes • Homeowner’s insurance • Condo or HOA fees if applicable
When a town has lower taxes, your lender is able to approve you for a larger mortgage. But when a town has high taxes, your lender must reduce the size of your mortgage approval because the taxes take a large bite out of what you are able to pay each month. In short, purchasing in a low tax town will increase your buying power. 25
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