Affordability Awareness

When considering whether to purchase a home, prospective buyers must include immediate and long-term budget-benders such as insurance, property tax, and operational costs. Builders should help them learn all about it.

When some homebuyers think about affordability, they focus on the purchase price, their mortgage rate and the principal and interest they’ll pay on their loan. Sometimes they’ll compare that estimate with their monthly rent to decide if they can accommodate that new payment. While that’s certainly an initial step many buyers take, there’s far more to homeownership than the price and the payment.

There’s more to an affordable home than a low purchase price or mortgage rate. Builders need to help homebuyers to consider all expenses, including less-obvious ones such as insurance, property tax, and maintenance costs.

Dan Pena, president of partnership lending with mortgage loan provider loanDepot, says that’s an important message for builders, lenders and others with ties to the construction industry to bring to their customers.

“From the minute we first meet with prospective borrowers, we talk about the full payment,” says Dan Pena, president of partnership lending with loanDepot, a mortgage loan provider. “For a long time, lenders used to advertise mortgage rates, and principal and interest estimates as a hook to bring in customers, but we don’t see that much anymore.”

One of the reasons for that shift is how quickly other costs of homeownership, particularly home insurance, property taxes and homeowner association fees, have risen in recent years. In addition, more homebuyers today consider the long-term implications of buying a home. Green Builder Media’s Smart COGNITION Data surveys have found that 92 percent of buyers now consider long-term costs before deciding about buying, building or remodeling a home.

Builders must approach buyers’ concerns about long-term expenses by first understanding what the buyers are looking for. 

Builders can show or demonstrate various ways to emphasize a home’s affordability to prospective buyers. This includes elements such as type of housing construction, energy-saving products, and value-increasing design.

While first-time buyers are often the most concerned about how they will afford homeownership, move-up purchasers worry about ongoing and rising expenses, according to Pena.

“So many costs of homeownership are moving at a faster pace than in the past, especially insurance,” Pena says. “We work with borrowers to focus on what they’re comfortable spending versus what they qualify for, and have them think about their future budget, not just immediate costs.”

Builders and other industry experts should start by helping buyers understand that proper money management can make it easier to acquire a new home than they might believe.

For example, Pena recommends that when borrowers are preapproved for a loan, they should practice paying the mortgage, especially if they are currently living at home and not paying rent.

“For example, if they qualify for a loan with a payment of $3,500, they should put $3,500 in savings every month to see what that feels like,” Pena says. “If they’re paying rent, we suggest they put the difference between their rent and the mortgage payment in the bank.”

Homeownership includes numerous ongoing and long-term costs, including insurance, periodic inspections, and overall maintenance.

In addition, Pena reviews borrower credit reports to suggest changes that can improve their cash flow and possibly their credit score, such as consolidating debt from three credit cards onto one or, better yet, paying them off.

“We go through bank statements to see how many automatic subscriptions they have or any other spending that they can reduce to better afford housing costs,” Pena says.

For new buyers, Pena discusses the need to budget for basic maintenance costs for everything from HVAC filters to landscaping. “Newly built homes require substantially less maintenance, since everything is new and under warranty,” Pena notes. “But there will still be some costs.” That could be a major selling point for builders, even after the initial home purchase.

Pena recommends setting aside 1 percent or 2 percent of the mortgage balance annually in a special account for home maintenance, which would be $4,000 to $8,000 on a $400,000 loan. “If you bought a new home and don’t need to spend that money, you’re building a nice nest egg for the future,” Pena says. 

That nest egg can be a valuable cushion for future increases in property taxes, utility bills, insurance and homeowner association fees, he says.

Builders can also help home shoppers make “the choice” by stressing that buying an energy efficient home or investing in energy efficient upgrades can be a long-term solution to rising utility costs.

There can be numerous fees associated with a new home—such as ones for a homeowners association, maintenance, and future assessments—which will increase the amount of money needed to run a household.

The Properties of Property Tax

Another tip builders can give: A reminder about property taxes. Homeowners can’t usually fix policies that impact their local property taxes on their own, they can appeal their individual assessments. In most states and local jurisdictions, there are discounts available for certain groups of people that can reduce their property tax burden, such as veterans, people with disabilities or seniors. 

“For resale properties, tax assessments are usually listed on sites such as Realtor.com or Zillow along with a home listing,” Pena says. “In most states, buyers can also check county records to see tax bills by year, which can help them estimate how much their tax bill may rise. If county records aren’t available, they can also ask their real estate agent to research this.”

There can be surprises. For example, if the buyer wants a home in California, another key thing to prepare for is the supplemental property tax, which occurs after a property’s value is reassessed following the final purchase of a resale home. Initially, the property tax bill is based on the house’s value during the last time it was assessed. But that amount can jump by hundreds, even thousands of dollars annually, if the property value has increased since that assessment. The new owner will receive a one-time supplemental tax bill a few months later. Depending on the county of origin, the entire amount may be due upon receipt, split into multiple payments, or folded into the property tax payment for the following year, according to the California State Board of Equalization.

Property taxes can vary by county and even town, so budget-conscious homebuyers should discuss this topic with local real estate agents and comparison shop if they have flexibility about where they want to buy.

“When you buy new construction homes, it’s smart to work with a lender who knows how tax assessments work,” Pena says. “Often, a tax assessment won’t be done until after the home is complete, so looking at property records won’t help. You need to understand what your fully assessed tax bill will look like in the next year, not when you first buy the house. Otherwise, you could have a really low prorated payment your first year and then a big jump the next.”

Long-term costs of home ownership are the biggest thing on homebuyers’ minds.

Prepping for Home Insurance Premiums

Yet another builder tip: Get ready for home insurance costs and expect them to escalate. insurance rates rose 45.8 percent nationally from 2020 through 2025, nearly double (1.8 times) the 26.1 percent inflation rate for that same period, according to analysis by LendingTree, an online lending marketplace.

“One big reason for this larger-than-normal increase was the uptick in massive natural disasters during that period,” says Rob Bhatt, a home insurance analyst and senior writer with LendingTree, an online lending marketplace. “Wildfires in the West, hurricanes in the Gulf States, and tornadoes, wind and hailstorms in the Midwest were more frequent and more severe—worse than ever before—which meant that insurance companies had to pay out more in claims.”

Combined with a spike in inflation beginning in 2022, home insurance is in the midst of a “perfect storm,” he says. 

“More homes need rebuilding,” Bhatt says, “and they’re more expensive to rebuild.” 

Some states have been hit harder than others, Bhatt notes. For example, insurance rates rose 100 percent in Colorado, 96 percent in Iowa and 88 percent in Minnesota from 2020 through 2025, primarily due to natural disasters. In contrast, rates rose the least (19 percent to 20 percent) in Maine, Vermont and West Virginia during that period.

“Buyers can get an insurance quote even before they make an offer on a house,” Bhatt says. “Lenders typically pencil in a home insurance cost, too, after they contact a couple of companies to get a ballpark fee.”

Bhatt says home insurance is becoming a much more important part of the home buying process. A sticky situation is with homes that are in high-risk locations, such as fire zones or flood plains.

“Buyers are aware of how expensive it is, and in some cases, insurance companies are deciding it’s too risky to insure a home,” he says. “That used to be just coastal Florida and wildfire-prone areas in California, but now this is happening in more areas.”

Lenders can help buyers with their home insurance costs, Pena says.

“We have relationships with insurance companies and can call them to get an estimate of the cost even before a new community is built,” Pena says. “We can shop on the behalf of buyers to help them find and buy insurance as part of the lending process.” 

Consider insurability issues during a home search and inspection, Bhatt suggests.
“Insurance inspectors will look for things like tree branches that are too close to the house, moss growing on the roof or signs of water damage before they approve an insurance policy, so it makes sense to look for those things with a home inspector,,” Bhatt says. 

Builders can recommend comparison shopping among insurance companies to find the best price, just as Bhatt would. 

“Homeowners should essentially self-insure to a certain extent by choosing a high deductible such as $2,000 or more,” he says. “Think about bracing yourself for higher out-of-pocket costs with an emergency fund to help if disaster strikes.” 

Although they may have less impact on premiums than a higher deductible, bundling home and auto insurance can help, along with other discounts for investing in your home, such as smart home systems for leak detection, he says.

“Homeowners who take resilience measures to reduce the impact of wind and fire can generate discounts, plus those things help your home survive,” he says. “Builders who invest in building more resilient homes, especially if they’re built to IBHS FORTIFIED Home standards, which go beyond building codes, can potentially generate savings for their buyers.”

These features may cost more upfront, Bhatt says, but the financial benefits of sustainability can lead to lower costs over time and increased value. 

“Homeowners find this frustrating, but it’s generally good to avoid using insurance for small claims, because that’s when an insurance company is likely to raise your rates or even drop your coverage,” he says. “This is why a higher deductible is helpful, because it prevents you from making small claims and means you’ll only use your insurance for things you can’t afford.”

Is an HOA Worth It?

The 2021 collapse of Champlain Towers South, a 136-unit condominium in Surfside, Florida, served as wakeup call for many condo owners and HOAs about their responsibility for the maintenance and safety of residents. CREDIT: iStock/felixmizioznikov

While loanDepot includes estimated homeowner association (HOA) dues in their loan preapproval documents, Pena says many buyers overlook this cost at first. The same goes with condominium fees (a.k.a., maintenance fees).

“You need to include these fees in your budget and recognize they will likely rise over time,” Pena says. “New housing developments often establish HOAs, so buyers know what to expect. Existing homes usually provide that information in the listing or you can ask your agent or the seller.”

Not every home is part of an HOA or condominium. However, 44 percent of home listings in 2025 included an HOA or condo fee, according to Realtor.com, and approximately 68 percent of new homes are built in a homeowners association. 
Along with other costs of homeownership, HOA dues have been rising in recent years due to higher insurance costs, inflation and increased building costs. Realtor.com’s research found that the median HOA fee in 2025 was $135, compared to $108 in 2019. 

“Community association assessments vary from as little as $25 per month to more than $1,000 monthly, but the average is $150 per month,” says Dawn M. Bauman, CEO of the Community Associations Institute, an education and advocacy organization that represents homeowner and condo associations throughout the U.S. “Condominium assessments are typically in the higher range because there’s more shared property in condo buildings than in an HOA, although some HOAs with golf courses or other resort-style amenities have higher assessments.”

Assessments vary according to the location of the community and what’s covered, such as private roads, sidewalks and storm management in some cases, according to Bauman. Generally, the fees cover amenities such as swimming pools and playgrounds, along with common area maintenance, snow removal, landscaping and a master insurance plan.

“Rising costs and mindfulness of saving for maintenance and repairs has led to assessments increasing in many associations, but not necessarily across the board,” Bauman says. “When you live in a community association, the board and the management have to agree and convince every owner to save money to replace, repair and maintain all major components in the community.”

One benefit of HOAs can be stressed by builders: Prevention of major disasters. 

The 2021 collapse of Champlain Towers South, a 136-unit condominium in Surfside, Florida, which killed 98 people and injured 11 more, served as wakeup call for many condo owners and HOAs about their responsibility for the maintenance and safety of residents. According to the National Institute of Standards and Technology (NIST), neglect and construction flaws contributed to the incident. Ultimately, the investigation led to greater scrutiny of community association management by mortgage lenders and new requirements from state and federal agencies related to maintenance and reserve funds to pay for repairs.

“Typically, you’ll pay 35 percent more to repair or replace something if you’ve deferred maintenance, so the best practice for community associations is to charge assessments that reflect maintenance needs,” Bauman says. “This is a benefit of a lesson learned from the tragedy of the Surfside collapse. We’re seeing more community associations committed to build reserves that help them stay well-maintained and financially sound.”

For buyers considering a home in an HOA or condo, it’s important to know what the fees cover. In some cases, shared payment for amenities such as a swimming pool and fitness center provide access to something homeowners might not have otherwise, according to Bauman.

“Buyers should ask about the assessments and whether they’re expected to go up in the future,” Bauman says. “They should ask if a special assessment for a specific project is anticipated in the future, and whether a reserve study has been done that they can review. Mostly, buyers should look for transparency from the board and association management.” 

Publisher’s Note: This content is made possible by our Today’s Homeowner Campaign Sponsor:  ProVia. 

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