So you've found the perfect city, maybe Glenview, Wilmette, or Northbrook, the perfect neighborhood, and the perfect house. You made your offer and, wonder of wonders, it was accepted! Next, of course, is that not-so-much-fun part of buying a house, obtaining and paying off the mortgage.
There are several pieces to your monthly mortgage payment. Just what are they, you ask? Well, let's see!
1. Principal. The major part of the mortgage over time is the portion that goes to the finance company to repay the funds that they loaned you to purchase your new home. At the beginning of your loan, however, this portion may be only a small piece of the mortgage pie.
2. Interest. This is the amount of money, probably figured as a percentage of what you've borrowed, that the finance company charges you to use their money. At the beginning of the loan, a larger percentage of your payment will be going to pay the interest than will be going to pay the principal.
3. Private Mortgage Insurance. For those making a down payment that is less than 20% of the loan amount, the lender may require them to purchase Private Mortgage Insurance. This will protect the lender from a big loss if the homeowner defaults on the loan. There are a few ways to avoid this - make a larger down payment, accept a higher interest rate - so see what is available before purchasing PMI.
4. Escrow. This is sort of a little savings account that you are required to pay into monthly as part of your mortgage payment. This money is then used to pay property taxes and insurance when they come due, probably once a year. The escrow company should handle these payments for you, but it is best to keep an eye on things yourself, making sure that the payments are made in a timely manner.
Are you planning on buying a home in Glenview or Wilmette in the near future? Why not contact the Marla Schneider Team to help you find the best home and mortgage for you. They have lots of resources available to make this as painless as possible.
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