Understanding a Mortgage Payment
As you go thorough the Folsom mortgage process, you’ll hear a series of terms and acronyms related to your mortgage payment. Let’s look at what they mean.
Your mortgage payment is generally due on the first of the month, and most lenders start assessing late fees on the 15th. It is extremely important not to make a mortgage payment late.
When you receive a mortgage bill, there will be a few numbers that add up to your total payment:
Principal
This is the portion that goes towards paying down your balance on your Folsom mortgage.
Interest
The interest payment is essentially the amount you’re paying the bank over time to borrow the principal balance.
Taxes
Real Estate Taxes due to the County where your home is located can be included (Impounded) in your monthly payment.
Certain government loan programs like FHA require that taxes and insurance be included with the total mortgage payment.
Insurance
This is your hazard insurance, which protects your home and belongings. It can also be impounded in your monthly payment. While there are many ways to save money on your property insurance, it’s important to know and trust your insurance agent so that you can be fully aware of what’s covered in your policy.
Mortgage Insurance
Mortgage insurance is in addition to hazard insurance and completely unrelated. A lender will require a borrower to pay mortgage insurance on a property when you put less than 20% down. FHA and USDA have mandatory mortgage insurance, but in a different form. The main purpose of mortgage insurance is to protect the lender from foreclosure losses if the borrower fails to meet the monthly payment obligations.
Now you know where the money goes!
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