Berkeley Realtors Berkeley Realtor - Barbara Hendrickson
Serving Buyers and Sellers in the Bay Area including Albany, Berkeley, El Cerrito, Kensington, Oakland, Rockridge, Piedmont and the surrounding San Francisco East Bay Area

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For Buyers...

The Home Buying Process... Who Pays What? | Checklist for Loan Application | Components of a Mortgage Payment | The Loan Process | Shopping For A Lender | Getting Pre-Approved | The Inspection Process | Physical Inspection | Calculating Tax Savings

Components of a Mortgage Payment

Your monthly mortgage payment is made up of several components. This housing expense is commonly referred to as a "PITI" or principal, interest, taxes and insurance. PMI (see below) and homeowner's association dues may also make up a portion of your total payment.

The original balance of money loaned, excluding interest. Also the remaining balance of a loan, excluding interest. The interest is calculated on the principal.

The charge for the use (loan) of money.

The county assessor charges property tax based on the value of your home. Two tax installments are due each year. The first installment is due November 1 and is delinquent on December 10. The second installment is due February 1 and is delinquent on April 10.

A contract that pays for loss on a home from certain hazards, including fire. You obtain homeowner's insurance form your insurance agent. The standard policy pays replacement costs, minus depreciation based on actual cash value. Talk to your insurance agent about the different types of insurance available. Hazard insurance may be impounded.

Note: Taxes and insurance may be impounded, depending on the amount of your downpayment. Anything less than 20 percent down may require an impound account. An impound account is a trust account set up by the lender. A portion of the monthly payment is credited so that funds will be available for the payment of taxes and insurance. This way, the lender actually pays your tax bill for you.

PMI (Private Mortgae Insurance) - Depending on the amount of your downpayment, you may be required to have PMI. Anything less than 20 percent may require PMI. Because loans with small downpayments involve substantially more risk for the lender, they need protection in case the loan goes into foreclosure. Because this insurance is available, lenders can offer loans with lower downpayments.

PMI may require an up front fee which is payable as part of your closing cost, and is also required to be paid monthly with your payment. The cost of PMI varies according to the amount of your downpayment.

FHA charges a fee for mortgage insurance call MIP or Mortgage Insurance Premium. An up front fee (which may be financed) and a monthly fee are assessed. VA charges a funding fee which may also be financed.

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Barbara Hendrickson

Phone: 510-708-3800

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