Mello Roos is an addition to your property tax bill. Your property tax bill is made up of 3 things:
1) 1% of purchase price
2) Local annual bonds
3) Mello Roos Bonds / Community Facilities District Bonds
Annual bonds typically add up to approx $500 per year. You can usually assume 1% of purchase price plus $500 for an annual tax bill. However, if it has Mello Roos (MR or CFD bond), you need to add that too. I start by finding all 3 number totals. I add them up, and then divide that total by 12. You can now determine how much of your payment is made up of your monthly property tax bill.
For most new construction homes, you can assume that they will have about $3,000 per year in Mello Roos. I find that most home builders are quoting between $230 to $250 per month for Mello Roos. Some are even higher, and occasionally you will find some with less although that’s pretty rare. This is because Mello Roos bonds are used to pay for infrastructure. Things such as roads, street lights, police, fire and schools.
For resale homes, I find that homes built prior to 1990 have no Mello Roos at all. Homes built between 1990 and 2000 will have some Mello Roos bills of approx $70 to $600 per year. Homes built from 2000 to 2010 can have Mello Roos more in the range of $1000 to $1500 per year. For homes built after 2010, it starts climbing quickly. While these are good ways to get a general idea, each house is unique. I have come across plenty of homes built just a few years ago with no Mello Roos at all. This is not common but does happen. Typically found in smaller subdivisions built into an area of pre-existing infrastructure.
Important Note: Your lender has you pre approved for a purchase price but not for a Mello Roos amount. I find that some lenders will pre approve you under the assumption that you won’t have any Mello Roos. Some pre approve you with the assumption that the Mello Roos will be at new construction levels.
Find out what amount of Mello Roos your lender is considering. When quoting you a payment or approving you for a specific purchase price this detail is huge. If the lender is not calculating Mello Roos, you could end up not qualifying for what you are shopping for. Or you could end up with a much higher mortgage payment than expected. I’ve seen lenders assume tons of Mello Roos in a pre approval calculation. This just results in buyers missing out on homes they could totally afford. Ask your lender if Mello Roos is included in your pre approval. This way you don’t miss out on what might be the best home for you.