When it comes down to it, as consumers, we all want to know the bottom line, the numbers.  It is important to understand what you are paying for something and why.

Two things that we spend a lot of time discussing with our clients is their monthly mortgage payment and their cash to close.  We provide a total cost analysis to all of our clients around the time they are pre-approved.  This analysis breaks down the the estimated monthly payment, and cash to close and are made to every client’s unique situation.  So what makes up a mortgage payment?

A mortgage payment consists of 4 or 5 components.

  • Principle – The part of your payment that goes towards paying the original amount of money borrowed
  • Interest – The charge for the use of the borrowed money
  • Taxes – These are assessed by your country.  The tax amount is specific to each house
  • Homeowners Insurance – This insurance protects your home, you pay 1/12 of the annual amount each month
  • Mortgage Insurance – This insurance protects the mortgage and may be required if your down payment is less than 20%

Closing costs can vary per transaction.  In addition to your down payment, here is a general list of what to expect.

  • Lender Feeds
    • Loan Origination – This is the total cost the lender collects to pay for the necessary items for your transactions, including processing, underwriting, closing, and flood certification.
    • Appraisal – This fee is collected up front which goes to the appraiser so he can access the value of your new home
  • Title/Attorney Fees
    • Title insurance – owner’s coverage and lenders coverage
    • Survey of the home
    • Settlement Fees – Attorney or Title company fees to complete legal services
  • Government Fees
    • Transfer Taxes – Each state will require a percentage of the sales price
    • Recording Fees – State/county recording fees
  • Prepaid items/Escrow Account 
    • Property Tax
    • Hazard Insurance
    • Interest per day
    • Mortgage Insurance (if applicable)
  • Other (if necessary)
    • Home owners association dues
    • Radon test
    • Pest inspection
    • Well and septic test
    • Home inspection
It is important to make sure your lender is knowledgeable in the area you are buying in to ensure your estimates are as accurate as possible.  If you have any questions about monthly payments or closing costs or would like a total analysis of your own, please contact me today!