A monthly mortgage payment includes principal and interest. Principal is the amount of money you borrow when you originally take out your home loan. Interest is the extra amount charged by the lender in exchange for the loan.
Other costs you need to factor in each month toward your total monthly payment include:
Property taxes. This is an annual fee usually determined by your local government and often based on a percentage of the home's assessed value. They typically range from about $100 to $200 a month. If you have an escrow account, your mortgage servicer will use funds placed in escrow to make the property tax payments each month on your behalf.
Private mortgage Insurance (PMI). You may need to pay this if your down payment is less than 20% of your home’s purchase price. This protects the lender (us) if a borrower (you) defaults on a home loan. PMI usually increases the monthly payment amount until you’ve paid off the equivalent of the 20% down in principal.
Homeowners insurance. This is a form of property insurance that covers damages and losses to your home or the things in your home due to events like inclement weather, vandalism, or burglaries. The price can vary depending on several factors like your state, the insurance company you select, and the age and rebuild value of the home. It typically averages around $1,200 a year.
With us, in order to close, we’ll ask you to confirm you’ve paid the entire amount of your first year of homeowners insurance. After the first year, you may be able to pay this in monthly installments, either directly to the insurance company or through an escrow account managed by your mortgage servicer.
Homeowners association (HOA) dues. Though not all homes have HOA fees, when they do, they typically range from $100 to $700 a month. They typically cover things like home improvements and maintenance (for example, replacing your roof or weekly lawncare) and upkeep of any shared space, like a pool, gym, or community center.
