Buying a house also means determining a way to pay for it, typically in the form of a mortgage payment. Though there are many factors to keep in mind as you find your ideal home, there’s no need to stress. Instead, it’s time to simplify. As you seek out the funding you need, here are the components of a mortgage payment that will make your purchase possible.
Interest
You can’t have loans without interest! Essentially, the interest is the additional money you pay to have a loan extended to you.
Principal
To identify the principal, first start off with just how much money was originally loaned. That means it’s the figure without interest. Then, you contrast it with what’s left to be paid off in the loan. These two figures will help determine the principal—and the interest you’ll pay.
Taxes
In this case, we mean property taxes. When you own a home, the property taxes are determined according to how much your home is worth. As tax season rolls around, you’ll make your yearly payment. However, in some cases, you may pay your property taxes on a monthly basis. Talk to your lender to see which option you’ll be following.
Insurance
One of the most important components of a mortgage payment is the insurance. After all, if you extend a loan, you want your assets to be protected. Insurance is due once a year; however, some lenders may set it up so that a portion of the fee is credited monthly.
Private Mortgage Insurance
There’s another kind of insurance to remember: private mortgage insurance (PMI). Usually, people who choose to make smaller down payments will need to rely on this insurance. This will protect both them and the lender.
FHA Loans
FHA, or Federal Housing Administration, loans are to be paid at the beginning of the mortgage process. They cover your mortgage insurance, also referred to as MIP.
VA Loans
Loans from the Department of Veterans Affairs are also referred to as VA loans. After the requisite funding fee, the Department of Veterans Affairs will guarantee part of the loan. If you or a spouse have served in the military, VA loans can make a huge difference in the home-buying process. With their help, you can decrease closing costs too.
Summary
The home buying process can seem overwhelming. Fortunately, with your new knowledge, you can determine the components of a mortgage payment with ease.
Still looking to buy or sell? Fill out our contact form here. Whether you’re dealing with the Auburn, Opelika, or Lake Martin area, Ryan Roberts is here to help. Hoping to increase your real estate expertise? Visit our blog here.