The Homebuyers Grind

What is included in a full mortgage Payment?

For starters, this is meant to detail out what is generally included in a mortgage payment. There are many variations of what can be included and what would be included for your scenario, but this post is meant to show what most of the homeowner’s mortgage payment will include. We will be discussing a fixed interest rate, fully amortizing mortgage. This means the rate will not change throughout the mortgage and the balance will be fully paid off at the end of the term.

What does the PITI or PITIA payment mean?

Often a full mortgage payment is referred to as a PITI payment, if you have never heard of this term before it can be quite confusing. Let me break it out for you:

P: Principal

The principal portion of the payment is what goes towards paying down the balance of the loan. Most mortgages nowadays are fully amortizing mortgages meaning all the full balance will be paid by the completion of your term.

I: Interest

The interest portion of the payment goes towards paying the interest accrued on your mortgage. Most often this is a fixed rate meaning the percentage you pay is fixed throughout the life of your loan. If you opted for a variable or adjustable interest rate mortgage this portion can vary.

On most mortgage statements the Principal and Interest payment will be grouped together into one portion. On a fixed interest rate mortgage, the total of principal and interest you pay each month will not change. As you move through the mortgage term the amount that is applied towards principal and interest will shift but the combined amount will remain unchanged. Review your mortgage amortization schedule to see the exact amount that would be applied to principal or interest at a given point in your term.

T: Taxes

Taxes are a commonly forgotten item in the mortgage payment. Each state has property tax, and the amount varies from state to state, but generally, each individual county will determine the rate at which property is taxed. That rate called the levy rate is then multiplied by the county’s assessed value of the property to determine the yearly property tax.

Then take the yearly property tax and divide it into the number of payments your loan requires you to make through the year. Loans on a monthly repayment structure would be divided by 12.

I: Insurance

The insurance portion covers two different types of insurance: property insurance and mortgage insurance.

Property Insurance

Property insurance covers the property itself. It is required by most lenders when a mortgage is secured against the property. This is insurance helps you if something should happen to the property.

Hazard insurance or general property insurance is required on all properties.

There are other types of insurances that may or may not be required. Such as Flood Insurance, required only when the property is located within the boundaries of a flood zone. Others might include Fire Insurance, Wind Insurance, Earthquake Insurance, etc.…

Mortgage Insurance (PMI, MIP, MMI or MI)

Mortgage Insurance (MI), Private Mortgage Insurance (PMI), Mortgage Insurance Premium (MIP), and Monthly Mortgage Insurance (MMI) are all different variants of roughly the same thing: Insurance for the lender in the event you default on your loan.

Different mortgage programs have different requirements for mortgage insurance and how it is structured. Not all scenarios required mortgage insurance and that is why it is important to know your options.

A: Association Dues

If the property is apart of a Homeowners Association, it is possible there is a monthly or yearly fee required to be paid and may be required to be included the payment.

Learn the ins and outs of the home mortgage process in a simple to understand yet extremely detail-oriented format. This podcast is for the homebuyer, homeowner, real estate agent, or anybody looking to learn the truth behind what happens in the mortgage process from start to finish and beyond.

Hosted by Brady William Bell, the mortgage loan officer based out of Idaho that helps 100’s of people through the mortgage process for purchases and refinances each year. Tune into The Homebuyers Grind podcast as we assist and teach first time home buyers, seasoned homebuyers, homeowners, real estate investors, real estate agents, mortgage loan processors, or anybody looking for help for the mortgage process.

Topics we will discuss:

Learn everything from A-Z of the mortgage process including the underwriting process and what happens when your loan is being underwritten, what is an appraisal and why you need to order an appraisal, how appraisals differ from home inspections, why you must close at a title or escrow company, what role the title/escrow company plays, what happens when you are closing.

Learn what the mortgage disclosures are: what is and how to read a loan estimate? What is and how to read closing disclosure? What is an anti-steering disclosure? Learn what you are signing and why it is required.

What is included in a mortgage payment and how to reduce your mortgage payment without refinancing. What is homeowner’s insurance, flood insurance, hazard insurance, and why is it required? What is a homeowner’s association? What are property taxes? What is a PITI or PITIA payment?

How to get pre-qualified and how to get pre-approved and what the difference is.

What is credit and how to use it to your advantage during the mortgage process? Learn why a credit score can be different when getting a mortgage, a car, or checking it on soft check credit services.

Learn about first-time homebuyer programs and credits available.

How to buy a house with or without a down payment.

How to buy a second home or how to vacation property.

How to build a house with no down payment. How to get a land loan to build a house. How to get a construction loan?

How to buy an investment property and how to house-hack.

What is mortgage insurance, what is upfront mortgage insurance, what is the VA funding fee? Everything about UFMIP, PMI, MI, MMI, Funding Fees.

How to remove mortgage insurance or how to lower mortgage insurance.

We will discuss the different home purchase and refinance programs and how to smartly pick which is right for you.

How to buy a house with an FHA loan, learn the advantages of FHA.

How to buy a home with a conventional loan and learn why it's smart to use conventional versus other loans.

Learn about Veteran VA home mortgage options and why veterans should take advantage of them.

What is a VA Interest Rate Reduction Refinance Loan IRRRL? What costs are included in a VA IRRRL and is it worth getting a VA IRRRL?

Learn about United States Department of Agriculture USDA Rural Development RD loans and how to find a home that works for a USDA RD loan.

What is down payment assistance? What are forgivable loans? What is the minimum down payment to get a house?

What are Non-QM mortgages and why getting a NON-QM mortgage could be smart for you?

What are discount points and what are origination points? What is the difference between discount and origination points? What is included in closing costs? What is an APR?

Is it smarter to buy a home or rent a home?

How to pick a real estate agent (Realtor) and what to expect.

What is a cash-out refinance and what is the difference between a cash-out refinance and a rate and term refinance? We will teach you how to weigh your options on your own so you can decide if it is smart for you.