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Extras make home payments climb

Think you know what you can afford as a first-time home buyer? You might want to grab a calculator and run those numbers again.

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There's a lot more to a mortgage payment than the loan amount and interest rate. Extras such as property taxes, mandatory structural insurance and private mortgage insurance, or PMI, can add as much as 30 percent to 50 percent to your monthly payment.

If you don't realize that going in, you could end up shopping for too much house or falling in love with a home that's really more than you can afford. Many of these costs will vary with the home, the location, the type of loan and the amount of your down payment.

If you're working with a mortgage banker, mortgage broker or real estate agent, he or she can usually give you some guidance in comparing the additional costs associated with one to those of another. But if, like many buyers, you start your home search online, you need an idea of how to make some rough estimates on your own.

Some components you want to consider:

Homeowners insurance: "A good rule of thumb is $3 for every $1,000 of the loan amount annually," says Jennifer Gavre, Wachovia mortgage banking executive for Georgia.

So that $200,000 home would cost you about $600 a year. Typically, you'll pay a year in advance at closing, and the next year's premium will be equally divided among your payments, an extra $50 per month. It covers damage to the structure of your home, but many policies do not cover flooding. If you live in a flood-prone area, you might need additional coverage.

"One thing worth remembering is that in some areas of the country, areas hurt by hurricanes in the past few years, premiums have gone up rather sharply," says Mike Fratantoni, a senior economist with the Mortgage Bankers Association. "So it's a good thing to have a handle on. Just like everything else, do your shopping and get multiple quotes."

One easy way to compare a house in one neighborhood to a similar home across town: get the ZIP code.

"Insurers have very detailed price rate sheets," says Fratantoni. Depending on the ZIP code, "they may have a different rate for you," he says.

Flood insurance: If you live in a flood-prone area (usually termed "100-year flood plain"), your lender will likely require you to have insurance that specifically covers flood damage. The cost will vary based on how close you are to flood-prone areas. Figure about $150 to $200 per year, says Gavre. Again, you'll pay a year in advance at closing, then next year's premiums will be divided into your monthly payments.

Property taxes: While the federal government will give you a tax break for investing in a home, you have to pay taxes to the local municipalities where the home is located. Depending on where the house is, you may pay several municipalities. In addition, some locations will offer tax breaks or special tax abatement zones to encourage home buyers.

Property taxes are usually a set rate, adjusted by the value of your home. As a general rule of thumb, figure 1 percent to 1.5 percent of the home cost per year, says Gavre. Using that yardstick, expect $167 to $250 per month for that $200,000 house.

So do people shop property tax? Not really, says Gavre. "They're buying the house they love in the school district they want," she says.

"You see it a little in the upper market -- $1 million or more," she says, "because a difference in property tax is much more significant."

Remember, you probably won't get the same tax bill the current owner does, says Fratantoni.

Ideally, property tax rates keep pace with the value of the house. Realistically, tax assessments may not be adjusted for years and then take a sudden climb, often when the house is sold.

Next: "Budget for the unexpected."
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