| • |
Principal
- the part of your monthly payment that
is actually credited towards paying
your loan off |
| • |
Interest
- monthly payment to pay the interest
on the debt |
| • |
Taxes
- 1/12th of your annual real estate
tax bill. This amount is paid into your
escrow account from which your mortgage
company pays the entire bill each year
when the real estate taxes are due.
In Chesterfield, Henrico and Hanover
counties, the taxes are paid semi-annually
on June 5th and December 5th. The City
of Richmond taxes are due once a year
on June 15th. Goochland, Powhatan, Louisa,
King William and New Kent counties are
due once annually on December 5th. |
• |
Insurance
- 1/12th of your annual fire or homeowners
insurance policy is paid into your escrow
account and the annual insurance premium
is paid by your mortgage company when
due. Fire and homeowners insurance policies
are always prepaid at least 12 months
in advance. You need to prepay your
first year of insurance at closing.
This is called a prepaid item. |
• |
P.M.I.
- private mortgage insurance. If your
down payment is less than 20%, lenders
require a private mortgage insurance
premium to protect the lender's mortgage
investment if you default on your payments.
Normally, P.M.I. can drop off if you
can prove to your mortgage company that
your loan amount is no higher than 80%
loan to value (L.T.V.) |
• |
Association
Fees: Townhouses and condominiums require
fees to be paid to the homeowners association.
These fees are separate from the mortgage
payment. They are included in the ratios
when a buyer is qualifying for a loan.
They are included in the "front
end" ratio when you qualify for
your loan. |
|
An
easy way to remember what a payment
consist of is: |
 |
|
It's
a "PITI" to have to make a
payment:
(P) principal, (I) interest, (T) taxes,
(I) insurance
Note: House payments are due on the
first day of the month. There is a grace
period before a late charge is attached,
but they are due on the first of the
month.
House payments are paid in arrears.
Rent is paid in advance.
Banks can't charge you the interest
on your house payment until you use
the money for a month! This is why they
are paid in arrears.
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