Results Realty Buzz: Understand Your Monthly Mortgage Payment

Informing you on the Real Estate Market in Spring Texas and the surrounding areas and other interesting tid bits!

Understand Your Monthly Mortgage Payment

I know that PITI is sometimes hard to understand and George does a GREAT job of explaining it in language that is easy to understand!

 

A common assumption that is often made by those in the Mortgage Industry is that Homeowners understand what makes up their monthly mortgage payment, but in reality many do not.  So it is important that Loan Officers take the time to explain to each of their Borrowers, not only how much they will be paying each month, but also the different components that make up their monthly payment.

 

A common term in the Mortgage Industry when referring to the monthly mortgage payment is PITI.  PITI simply stands for:

 

Principal -  This is the portion of the monthly payment that reduces the remaining balance of the money that was borrowed. 

 

Interest -  This represents the cost of borrowing the money, and is stated as a percentage of the outstanding balance on the loan.  On a 30 year fixed loan, the total interest is almost the same amount as the amount of money that was borrowed.

 

Taxes  -  This is the money that is collected each month as part of your monthly payment, so that the Lender can pay the town the property when they come due.  In most towns in Connecticut, property taxes are collected every 6 months, with the exception of one town that collects taxes every 3 months and 6 other towns that collect taxes just once per year.  Taxes will differ from town to town, depending on the mill rate that the town sets for that year.  The mill rate is calculated as a percentage of each $1,000 that the town assesses the property value at.

 

Insurance -  This is the money that is collected each month as part of your monthly payment, so that the Lender can pay the Homeowners Insurance premium to the Insurance Company each year.  Homeowners Insurance is required on most loans to protect the Homeowner and the Lender for a loss or damages caused by fire, or other similar things.  Homeowners Insurance, also provides protection for theft, and injury.

 

These are the 4 components that make up the PITI, but there may be one other fee that could also be part of a monthly payment:

 

Private Mortgage Insurance (PMI) -  If a Borrower makes a downpayment that is less than 20% of the selling price of the house that they purchase, they will need to pay PMI.  PMI is required by the Lender to protect the Lender in case the Borrower defaults on the loan, and the Lender has to foreclose on the property.  When a Borrower is required to pay PMI, it will be calculated as a monthly amount that will be collected each month as part of the monthly payment.  A Borrower will be required to pay PMI until the Borrower has acquired 20% equity in the property on a Conventional Loan.  On a FHA Loan the Borrower will continue to pay the Mortgage Insurance (MI) each month until the Principle Balance has been reduced to 78% of the beginning loan amount, and the Borrower has been paying it for a minimum of 5 years.

 

Hopefully the above explanation helps homeowners better understand what makes up their monthly mortgage payment, and why it is a part of their payment.

 

 

******************************************************************************************************************

Who To Call For Your Mortgage Needs In Connecticut:

George Souto NMLS# 65149 is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308  gsouto@mccuemortgage.com, or visit my McCue Mortgage Homepage.

Comment balloon 9 commentsMarchel Peterson • August 18 2011 08:41AM

Comments

Hi Marcel, its been a while since we last visited.  That is a great post, it is a subject we spend quit a while on explaining to clients.  Especially mortgage insurance.  That is a good one to share.

Posted by Ellie Penaranda, Naples Florida Real Estate - Waterfront & Beach Co (239.776.5077 Downing-Frye Realty ) about 7 years ago

thanks for the reblog on this, Marchel.  This is a good one to have in the First Time Homebuyer packet, also

Posted by Mimi Foster, Voted Colorado Springs Best Realtor (FALCON PROPERTY SOLUTIONS ) about 7 years ago

Marchel, thank you for the reblog and helping to pass on this information.

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) about 7 years ago

Very good info for buyers...when asking about their monthly payment, buyers need to remember it's PITI and MI

Posted by Patricia Beck, Colorado Springs Realty (RE/MAX Properties, Inc., GRI, CDPE) about 7 years ago

I agree with you, Marchel!  George did a great job of explaining what goes into the payment!  Nice re-blog!!!

 

Posted by DeeDee Riley, Realtor - El Dorado Hills & the Surrounding Areas (Lyon Real Estate - El Dorado Hills CA) about 7 years ago

Marchel~!  A great post to reblog.  This question comes up very often, and now I can just print this out and pass on the information to buyers.

Posted by Joan Whitebook, Consumer Focused Real Estate Services (BHG The Masiello Group) almost 7 years ago

Good choice, Marchel, the information is stated plainly and clearly. I would reblog :)

 

 

Posted by Teral McDowell (Referral Patners LLC) almost 7 years ago

Very easy to understand and straight forward. :) Thanks!

Posted by Laura Cerrano, Certified Feng Shui Expert, Speaker & Researcher (Feng Shui Manhattan Long Island) almost 7 years ago

I should hope that after the bubble everyone is reading their documents but I doubt it.

Posted by Charles Stallions, 800-309-3414 - Pensacola, Pace or Gulf Breeze, Fl. (Charles Stallions Real Estate Services ) almost 7 years ago

This blog does not allow anonymous comments