Loan Surfer Home Buyer Guide


WHAT MAKES UP A MORTGAGE PAYMENT Principal: The actual amount you’re borrowing. Interest: What it costs to borrow the money for your home. Taxes: Real estate (or property taxes) Insurance: Homeowner’s insurance (and mortgage insurance, if applicable.

UNDERSTANDING ESCROW You may have noticed that taxes and insurance make up a portion of your monthly mortgage payment. These are called escrow payments. Each month, your lender will collect money from you (in your monthly mortgage payment) and put that money into an escrow account to pay your property taxes and insurance on your behalf. This not only protects the lender’s investment but also makes it easier for you to pay these expenses, rather than having to plan for hefty tax bills or insurance premiums on your own. Your escrow payments include the following: • Real Estate Taxes: A percentage of your home’s assessed value that gets paid to your local government to fund roads, schools, and other local services. 1

• Homeowner’s Insurance: Protects your home in case of theft or acts of nature, such as fire, hail, or tornadoes. 1,2

• Mortgage Insurance (if applicable): If you put down less than 20% when you buy your home, you’ll have to pay mortgage insurance. Let’s take a closer look at how mortgage insurance works next.

1 This amount is estimated by your lender, so keep in mind that you may get a refund or have to pay a balance at the end of the year. 2 Typically excludes floods and earthquakes.

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