What You Can Afford

Your Payment consists of:

Principal (P) – The portion of your monthly mortgage payment that reduces your total balance owed.

Interest (I) – A fee paid to your mortgage lender to compensate them for providing you with financing to buy a home. The interest portion of your monthly payment is calculated based upon the total balance owed, and does NOT reduce the total balance owed.

Property Tax (PT) – Tax imposed by municipalities, counties, and/or states upon owners of real property (homes and land) within their jurisdiction based on the value of such property. The value of your property is based upon the assessment of its worth by the collecting entity.

Home Insurance (HI) – An insurance policy that combines various personal insurance protections, which can include losses occurring to one’s home, its contents, loss of its use (additional living expenses), or loss of other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home or at the hands of the homeowner within the policy territory.

Mortgage Insurance (MI) if necessary – An insurance policy which compensates lenders or investors for losses due to the default of a mortgage loan. Mortgage insurance can be either public or private depending upon the insurer. Mortgage insurance fees vary by loan type, but are required on all FHA loans and conventional loans with a down payment of less than 20%. These premiums are in addition to the loan’s interest, but can be discontinued once you achieve 20% equity in the home.

Homeowner’s Association (HOA) if applicable – An organization created by a real estate developer, but managed by the neighborhood’s residents for the purpose of controlling the appearance and managing any common-area assets. HOA’s are widely used, and are meant to protect the value of its residents’ property.

Public Improvement District (PID) if applicable – A taxing entity which can finance, construct and maintain public infrastructure improvements. It has authority to issue debt and to impose a mill levy against real and personal property within the district. These assessments are becoming more common, but can still be avoided in many communities. Fees can vary from as little as $10 to over $100, but must be disclosed by the seller prior to an agreement to purchase. Public Improvement Districts have different names in different areas. Please contact a local real estate professional for further information.