Homeowners Insurance Is Becoming a Bigger Part of Housing Affordability

When most buyers start figuring out what they can afford, they tend to focus on two numbers: the price of the house and the mortgage rate. Those are obviously important. But there’s another expense taking up a bigger share of homeowners’ monthly payments: insurance.

Homeowners insurance premiums have risen significantly over the past several years. Nationwide, premiums increased more than 24% from 2021 to 2024, and in some parts of the country the increases have been much larger. For buyers already dealing with higher home prices and mortgage rates, that additional expense matters.

Your Mortgage Payment Isn't Your Entire Housing Payment

When you see an estimated mortgage payment online, it can be easy to think that's roughly what the house will cost you every month. But your principal and interest are only part of the picture.

Property taxes and homeowners insurance can add a substantial amount to the monthly payment, along with HOA fees when applicable. Depending on the home, your down payment and your loan, mortgage insurance could be another expense.

Insurance is especially important to look at because the cost can vary considerably from one property to another. Two homes with similar prices in the same general area don't necessarily have the same insurance costs. The age and condition of the home, roof, claims history, location and other property-specific factors can all affect what an insurer charges. That means a house that looks affordable based on the list price and mortgage payment may look a little different once you calculate the total monthly cost.

Why Are Insurance Premiums Going Up?

There isn't one single reason. Insurers have faced higher costs to repair and rebuild homes as labor and construction materials have become more expensive. Severe weather and larger insurance losses have also put pressure on the industry.

The result is that homeowners in many parts of the country are paying considerably more for coverage than they were just a few years ago. And while some of the most dramatic insurance stories have come from states dealing with hurricanes and wildfires, rising premiums aren't limited to those areas.

For buyers, the takeaway isn't that you should be afraid of insurance costs. It's that you need to know what they are before you make a decision.

Get an Insurance Quote Before You Buy

This is one of those steps that can easily get pushed toward the end of the homebuying process, but I think buyers should be looking at insurance earlier. Once you're seriously considering a property, talk with your insurance agent and get an estimate for that specific home.

Don't assume the insurance cost will be similar to what you're currently paying or what a friend pays for a similarly priced house. Get an actual quote and put that number into your budget. The same goes for property taxes. Look at what you can reasonably expect to pay rather than building your decision around principal and interest alone.

If you're comparing two houses, this becomes even more useful. A slightly less expensive house isn't necessarily the less expensive house to own.

Look at the Total Cost of Owning the Home

I've talked a lot lately about why buyers shouldn't make decisions based solely on mortgage rates. The same idea applies here. The question isn't simply, “What's my interest rate?” It's: “What is this house actually going to cost me every month?”

Mortgage principal and interest, property taxes, homeowners insurance, HOA fees, utilities and expected maintenance all play a role. You also want some breathing room for the things that inevitably come up once you own a home.

A house can fit the lender's numbers and still be uncomfortable for your budget. On the other hand, a home you initially assumed was out of reach may work once you actually sit down and run everything. The goal isn't to find the maximum amount you're approved to spend. It's to understand the numbers well enough to make a decision you're comfortable living with after closing day.

If you're thinking about buying, the Krop Team can help you look beyond the list price and understand the bigger financial picture before you make an offer.