What a Mortgage Payment Consists of
1) Principal: The repayment of the original amount borrowed on a monthly basis.
2) Interest: The cost of borrowing the principal amount, repaid on a monthly basis.
3) Taxes: Real Estate taxes paid to a local government agency.
4) Insurance: Homeowners insurance on the home. Also any mortgage insurance, which is paid to protect
the mortgage company.
The total of these items is known as the PITI (Principal/Interest/Taxes/Insurance) payment.
Types of Mortgages
Fixed: A fixed term (for example, 15 or 30 years) as well as a fixed interest rate. The interest rate and term
are fixed at the start of the mortgage. The monthly amount for the payment of principal and interest will
not change during the term of the mortgage.
Adjustable: Often referred to as an ARM (Adjustable Rate Mortgage). The interest rate on your mortgage
will be adjusted up or down according to current interest rate levels. The monthly amount for your
principal and interest payment will go up or down with these rate changes. These mortgages may include
"Interest Only" type of loans.
See more discussion on this subject on the Choosing a Mortgage page.
How much down payment?
One of the first questions that home buyers ask is "how much down payment are we going to need?"
Unfortunately, there is no standard answer. Down payments will vary from 0% (with a VA--Veteran's
Administration loan) to upwards of 25% (with certain "non-conforming" loans). As an average, most home
buyers make down payments in the 5%-15% range, although your own personal situation may dictate more
or less down payment. When you are factoring money for a downpayment, don't forget about closing costs,
which will total in the 2-5% range, payable in cash at the time of closing.
What is Prequalification? Does it mean that the loan is approved?
Prequalification is the initial step in securing a mortgage. A lender will analyze your current income, debt
and basic credit history situation in order to qualify you for a maximum loan amount. This gives you a
clear picture of your financial parameters and a maximum housing price (the mortgage amount plus your
down payment). With preapproval, the lender verifies your income, debt and financial picture, approving
the loan subject to a favorable appraisal of the property you select. Looking for a source for preapproval?
E-mail me and I will introduce you to some lenders.
General Mortgage Information
|Diana Hershchuk Murphy
Keller Williams Realty Partners
Cell: (914) 760-5533
Office: (914) 962-0007 x-145