Buying a home, lesson 3 of 14. About 4 minutes. Updated November 2026.
What a home really costs each month
Written by David Pham, REALTOR®, CA DRE #02438878
The short answer
The loan payment is only part of the real monthly cost. In the first example below it is about 71%. Taxes, insurance, dues and upkeep make up the rest.
The four lines every lender counts
Lenders describe a housing payment as PITI: principal, interest, taxes and insurance.
- Principal and interest. This is the loan payment. On a fixed-rate loan it stays the same for the life of the loan.
- Property tax. In California the base rate is 1% of the assessed value, which resets to your purchase price when you buy. Voter-approved local charges are added on top, so many Bay Area bills land between about 1.1% and 1.3%.
- Homeowners insurance. Lenders require it. In California the price and even the availability depend heavily on wildfire exposure, so get a real quote for the address before you commit.
The lines a listing page leaves out
- Mortgage insurance. On a conventional loan with less than 20% down you usually pay private mortgage insurance, or PMI. You can ask to cancel it once your balance reaches 80% of the home's original value, and it must end automatically at 78% if you are current. FHA loans follow different rules.
- HOA dues. Condos, townhomes and planned communities charge monthly dues. They can rise, and the association can levy a special assessment for big repairs.
- Mello-Roos and other special taxes. Some newer neighborhoods carry an extra yearly tax that pays for roads, schools or parks. It appears on the property tax bill.
- Upkeep. Roofs, water heaters, paint and plumbing wear out on their own schedule. Setting aside around 1% of the home's price each year is a common starting point; older homes often need more.
- Utilities. A house usually costs more to heat, cool and water than an apartment, and you now pay for trash and sewer directly.
Two Bay Area examples
These use a sample 6.5% 30-year fixed rate. They are illustrations, not quotes.
A $900,000 house with 20% down
| Principal and interest | $4,551 |
|---|---|
| Property tax at 1.25% | $938 |
| Insurance | $150 |
| Upkeep at 1% a year | $750 |
| Monthly cost before utilities | $6,388 |
The loan payment is $4,551. The real number is $6,388, which is $1,838 more.
A $650,000 condo with 10% down
| Principal and interest | $3,698 |
|---|---|
| Property tax at 1.25% | $677 |
| Insurance (interior policy) | $75 |
| Mortgage insurance | $244 |
| HOA dues | $550 |
| Upkeep at 0.5% a year | $271 |
| Monthly cost before utilities | $5,514 |
The condo costs $250,000 less to buy, but dues and mortgage insurance add $794 a month that the house does not have.
What a fixed rate does not fix
Only principal and interest are locked. Under Proposition 13 your assessed value can rise by no more than 2% a year while you own the home, so the tax line grows slowly and predictably. Insurance premiums and HOA dues have no such limit.
If your lender collects taxes and insurance in an impound account, your monthly payment is adjusted once a year to match the new bills. That is why a "fixed" payment can still change.
The first-year surprise: the supplemental tax bill
When you buy, the county reassesses the home to your purchase price. The difference between the seller's old assessed value and your price is billed separately, as one or two supplemental tax bills that arrive in the months after closing. They are usually not paid from your impound account, so plan cash for them.
Mistakes to avoid
- Using the tax amount shown on a listing. That is the seller's bill, based on what they paid years ago.
- Budgeting from the lender's maximum approval instead of your own comfortable number.
- Treating upkeep as optional. It is a real cost that arrives in large, irregular pieces.
- Assuming insurance will be easy to get. In higher-risk areas, shop for it during your inspection period.
Questions to ask
- Lender: what is my full payment including taxes, insurance and mortgage insurance, and when can the mortgage insurance come off?
- Agent: what is the total tax rate at this address, and are there Mello-Roos or other special charges?
- Insurance agent: can you write a policy for this address, and at what premium?
- HOA: what are the dues, how often have they risen, and is any special assessment planned?
What to remember
- Count principal, interest, taxes and insurance, then add mortgage insurance, dues and upkeep.
- Your property tax is based on your price, not the seller's bill.
- Keep cash ready for a supplemental tax bill in the first year.
Budget the whole cost of living in the home, and choose your own limit before a lender gives you theirs.
