What is included in a mortgage payment?
Welcome to this week’s The Mortgage Minute. We will take a look at what is included in a mortgage payment.
The Mortgage Minute is weekly informational series presented by Laura Borja, Your San Diego home loan expert.
A fixed rate loan has a set payment that doesn’t change. However, the distribution between principal and interest is going to vary over time.
At the beginning of the loan the majority of your principal and interest payment will be going to interest. Every month, the amount applied towards principal goes up little by little until the full principal balance of your loan is paid off.
IMPOUNDS included in a mortgage payment
An impound account for taxes and insurance is optional on conventional loans and required on all FHA, VA and USDA loans.
If you do have an impound account, your mortgage payment will include one 12th of your annual tax bill and your homeowner’s insurance.
The amount included in a mortgage payment for property taxes is going to be based on the actual tax rate and the assessed value as established by your tax assessor’s office. Property tax bills are explained in this video..
Homeowner’s insurance is required if you use financing to purchase your home and is highly recommended even if you pay cash for it.
Your lender will require a policy with sufficient coverage to replace or repair the structure should it be damaged or destroyed. The actual cost of the policy will be used to determine the monthly amount collected if it is going to be included in a mortgage payment.
Other items that may be included in a mortgage payment or paid on a monthly basis could include:
Conventional loans with less than 20% down will require mortgage insurance. Also, all FHA and USDA loans require mortgage insurance. The monthly payment must be included in a mortgage payment.
Homeowner’s association is paid on a monthly basis but you pay directly to your HOA management company not to your lender.
There you have it, a quick look at what is included in a mortgage payment.
If you have any questions or if you’re ready to start the pre-approval process by all means send me an email, give me a call or shoot me a text. I’ll be happy to help.
Thanks for checking out this week’s The Mortgage Minute. I will see you next week.