Your New Housing Payment Your monthly mortgage payment is made up of several components. This housing expense is commonly referred to as "PITI" or Principal, Interest, Taxes and Insurance. A second mortgage and homeowner's association dues may also make up a portion of your total payment. Lenders use PITI in computing your ratios and qualifying you for a loan.
Principal.
The original amount of money loaned, excluding interest. Also, the remaining balance of a loan, excluding interest. The interest is calculated on the principal balance.
Interest. The charge for the use (loan) of money.
Taxes. The county assessor charges property tax based on the value of your home. This is about 1.25% of the home’s value, annually. There are two tax installments due each year. The first installment is due November 1st and is delinquent on December 10th. The second installment is due February 1st and is delinquent on April 10th.
"Hazard" or Fire Insurance. The lender will require you to purchase and maintain hazard or fire insurance on the property. It’s also known as homeowner’s insurance. You arrange for this coverage with your own insurance agent. Please ask your Realtor for referrals to reputable insurance agents.
Mortgage Insurance. If your down payment is less than 20%, you will need to pay a monthly mortgage insurance premium. This will add the equivalent of .50% to .625% to your interest rate, depending on your exact down payment. You can avoid mortgage insurance by taking out a second mortgage to make up the additional down payment. The second mortgage may be obtained from a friend, family member or possibly from the seller.
DRE License #01161948 NMLS License #2394
Real Estate Broker, CA DRE Lic. #01370741 & NMLS #252755
