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As interest rates have risen in recent weeks, much attention has been paid to the effect rising rates may have on the housing market.  While interest rates do play an important role in your monthly mortgage payment, they are not the only factor to consider.

If you’re planning to purchase a home this year, be sure to understand each of the components that make up a mortgage payment, which can help you determine a monthly payment with which you are comfortable.  Here are the parts of a mortgage payment:

Principal: The principal part of your monthly payment pays off the loan amount you initially borrowed to buy your home.

Interest: In return for providing the funds you need to buy a home, lenders charge monthly interest on the principal balance you owe.

Taxes: Property taxes may be collected by your lender on a monthly basis and held in an escrow account to be paid on your behalf as they come due. The good news is: property taxes are usually fully deductible at income tax time. Consult a tax advisor for details.

Homeowners Insurance: Homeowners insurance provides financial protection in the event of losses that are the result of fire, wind, natural disasters or other hazards. Most mortgage lenders require you to have a homeowners insurance policy and may also be collect these funds to hold in an escrow account to pay your insurance company.

Mortgage Insurance: Mortgage insurance protects the lender against financial loss if a customer fails to repay the loan.

  • FHA-insured loans require a mortgage insurance premium (MIP)
  • VA loans may require a funding fee
  • Conventional loans can be insured with private mortgage insurance (PMI)

If mortgage insurance is applicable to your loan, that part of your payment is forwarded to the agency providing the insurance.

If you have questions, our mortgage consultants are always available to help you understand the home loan process!  Please also check out our on-line resources such as our mortgage payment calculator or the basics of buying!

 

 

 

This table is only to be used as a guide and does not include all loan types or loan features. Not all loan types are available to all borrowers. Borrowers will be subject to qualification and must satisfy all underwriting requirements and conditions. Not all borrowers will qualify. Speak with your mortgage consultant and carefully consider each of your home financing options so you can determine the home loan that is right for you.

All first mortgage products are provided by Prosperity Home Mortgage, LLC dba FM Lending Services. (877) 275-1762. Prosperity Home Mortgage, LLC products may not be available in all areas. Not all borrowers will qualify. Licensed by the NJ Department of Banking and Insurance. Licensed by the Delaware State Bank Commissioner. Also licensed in District of Columbia, Georgia, Maryland, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia, and West Virginia.

NMLS ID #75164 (NMLS Consumer Access at http://www.nmlsconsumeraccess.org/)

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