This acronym stands for
principal, interest, taxes and insurance. These are four main components that
go into a complete mortgage payment.
this is the original amount that you borrowed. Let's say you borrow $100,000 for a new home. That is
the original principal amount. This needs to get paid back based on the term of your note. In a fully
amortizing mortgage payment the term is going to include a scheduled amount of
payments that will include both principal and interest. Interest: This is the profit for the person or the entity that is loaning you the money.
Lenders like to get their profit upfront on a fully amortizing mortgage
the payment is going to include principal as well as interest paid
monthly. In most cases. Taxes: If your loan has an
impound account for taxes, this portion of your payment is going
to be one 12th of your annual tax bill. Your lender is going to collect this on
a monthly basis and place it into your escrow account. Your lender will
then pay the bill when it comes due two times a year. Insurance: If your loan is impounded for insurance, this portion is going to
equal one 12 of your annual homeowners insurance bill. Just like with your
taxes your lender is going to collect this on a monthly basis and place these
monies into your escrow account. They will then pay the bill when it is due
typically on an annual basis. Mortgage insurance: If you put down less than 20% on the purchase of your house you
may be required to pay monthly mortgage insurance. Although this is not part of
the PITI or maybe we should say PITII, It will be collected as part of the payment and will be broken down on your mortgage statement so you can see how
much money is going towards this. HOA dues:
Home Owners Association Dues (HOA) dues are not typically included in your
mortgage payment or your impound account however you may be purchasing a
property that has a homeowners association. You will be responsible for
these payments and will have to make them directly to the HOA manager. Special Insurance: You
may have to pay some kind of special insurance If you live in an area that has
high fire dangers. Some areas in California for instance require additional
coverage. Some insurance carriers will not cover homes in these areas or they
will require a separate policy to cover this risk.
Your PITI mortgage payment will vary
based on the interest rate that you decided to lock in and if you actually
decided to have an impound account for taxes and insurance. If you put
down 10% most lenders will allow you to make the choice if you want to have an
impound account or not. There are different views on the benefits or disadvantages
of having one. Some would rather budget for this and have the money set
aside and pay it when it’s due. Others would rather not deal with it and let
the lender or loan servicer take care of the accounting and bills when they are
due. Remember you may have a choice or you may not depending on the loan
you are getting.
Author:Sean Safholm BRE#01270334 Phone: 916-920-7000 Dated: April 26th 2014 Views: 1,866 About Sean: Sean Safholm started his career in real estate in 1999 when he was going to college to study real es...
Sean Safholm is a licensed Real Estate Broker in California. He is a real estate investor, broker, and seasoned mortgage pro. Sean has closed over 2000 transactions on the mortgage side of the business and a few dozen house deals for his own account. He has extensive knowledge on all sides of the real estate transaction and is here to assist first time buyers, move up buyers and investors with all their real estate needs.
The news came out a while back that Freddie Mac was suspending its new
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