Question : How do I use a “how much home can I afford?” calculator?
I’ve been playing with online house affordability calculators like this one:

http://finance.yahoo.com/calculator/real-estate/hom01

Why do these calculators ask you to enter “Estimated annual property taxes” and “Estimated annual homeowner’s insurance?”

Isn’t your annual property tax going to be BASED ON how much home I can afford? How am I supposed to know the amount of the taxes when I don’t know the value of the property? Isn’t this putting the cart before the horse? This would make a little more sense to me if they asked for a percentage.

Ditto, for the insurance. Isn’t insurance also based upon the value to be insured?

I’m probably misunderstanding these terms, but these calculators usually have really lousy instructions.

Thanks!
homeowners insurance calculator

Best answer:

Answer by glenn
It is a kind of catch 22, you are right.

But in my area the property taxes are going to be about 2.8% or the purchase price per year. In an area just 20 miles away it might be 2.0% or 3.5%. The city, school and county all sit their own rates. I don’t know how your area is. The insurance depends not only on how valuable the house is but how good your credit is and how large a deductible you can stand and a whole host of other variables.

I think these sites are trying their best to warn you that these costs might make up a quarter of your house payment or even more and you need to think about them when you are looking at houses.