What Will A Mortgage Cost?
There are several factors that go into how expensive a mortgage is in its entirety, including the actual loan amount, interest, closing costs, your down payment, and more. If you are wondering how much a home loan will be for you, please get in contact with us!
Costs To Be Aware Of When Buying A House
- Principal: The actual loan amount you borrow
- Down Payment: A percentage of the home cost you pay upfront
- Closing Costs: Costs that are paid at the closing of the loan. They are typically 3 - 6% of loan amount.
- Interest: The price of borrowing money, expressed as a percentage of the loan paid every year.
- Property Taxes: All home owners need to pay property taxes.
- Private Mortgage Insurance (PMI): This insurance protects lenders if borrowers default on the loan.
Principal
Principal is the amount of money you initially borrowed and agreed to repay. The principal should include the actual cost of the home you purchased except for the down payment, which is paid out of pocket by you when the mortgage is finalized.
Down Payment
A down payment is a percentage of the full cost of your home paid upfront. It is an indication to the lender of how invested you are to your home purchase. A higher down payment could potentially get you a lower interest rate than you would get otherwise, and it could also impact if you have to pay private mortgage insurance or not. The actual down payment amount varies from loan to loan.
Closing Costs
Closing costs cover fees, taxes and other costs related to the creation and processing of your home loan. You will receive a Loan Disclosure from us at least 3 days prior to when we have a meeting to close the loan. It will contain a list of all the closing costs you need to pay. Specific costs vary depending on the type of loan you get and your situation specifically, but they are generally between 3 and 6 percent of the total loan amount. If you have questions about what kind of closing costs you might receive, get in contact with us.
Interest
Interest is the cost of a loan, expressed as a percentage of the loan balance. Your interest payments are included in the mortgage payments. Borrowers who are low risk for lenders will likely get a better interest rate.
Property Taxes
Property taxes are an inherent part of purchasing a home. They are an expense that will continue for the entire time you live in your home, not just during the life of the loan. The amount you will pay depends on where you live and the value of your property.
Private Mortgage Insurance (PMI)
Private mortgage insurance protects the lender if the borrower defaults on their home loan, so it is often required by a lender when the borrower is potentially risky. If you get PMI, it is a monthly expense that will continue throughout the life of the loan.
