Mortgage Loan: PITI Explained

If you're shopping for a mortgage loan you've probably seen the acronym PITI in many of the loan offers you receive. PITI stands for principal, interest, taxes, and insurance. Here's what you need to know about the main PITI.PrincipalMortgage is the total balance of the loan. When you make your monthly mortgage payments you are gradually paying off that balance with the interest due for that month. Housing loans are front loaded with so much interest in the early years of the loan is very little of your mortgage payment is applied to the balance of the loan principal. Interest paid on a given month is based on the principal balance outstanding, as the years go by more of your payment is applied to the principal balance and less is paid to the lender as interest.InterestInterest is what you pay the lender the loan for you the money to pay for your home. Interest is a percentage of the balance due in the main street. Interest rates are of two types: fixed rates that do not change over the life of the loan, and adjustable interest rates that change at regular intervals, fixed in the loan agreement. If you have an adjustable rate mortgage your interest rate is tied to some financial index, more markup of the provider. Where the creditor periodically update the interest rate the amount of your monthly mortgage payment will change with it.TaxesProperty taxes are often included in your monthly payment amount. Lenders do this to protect their investment in your home if you allow property taxes to expire, your state or local government could put a lien on your house. If this happens, the creditor can foreclose if you fall behind on your house payments.InsuranceYour insurance policy protects the house from damage. Insurance premiums can be rolled into your monthly payment, such as property taxes, again, lenders do this to protect their interest in your property. Most home insurance policies only protect your home against fire, vandalism, and some other damage. If you live in an area subject to flooding of the mortgagee may require the purchase of flood insurance in addition to the policy of your home. Mortgage lenders may require borrowers with poor credit or down payments to purchase Private Mortgage Insurance, in addition to the policy of their home. Private mortgage insurance protects the lender from losses due to foreclosure. This insurance does nothing to protect you, homeowner.To Learn more about shopping for the right mortgage and avoiding common mistakes, register for a free guide guides using the links below.To Get your free guide tour guides using RefiAdvisor.com link below. Louie Latour specializes in showing homeowners how to avoid common mistakes and predatory mortgage lenders. For a free copy of "Mortgage Refinancing: What You Need to Know," which teaches strategies to find the best mortgage and save thousands of dollars in the process, visit Refiadvisor.com.Claim your free guide today at: http:/ / www. refiadvisor.comApex Mortgage Refinance