When buying a home it’s important to remember that there’s more to the monthly payment than the principal and interest costs. Make sure you budget for PMI, taxes, and insurance.
PMI (Private Mortgage Insurance)
If you get conventional financing and don’t pay 20% down, a private mortgage insurance premium is usually added to the monthly payment. This is to protect the investor if you default on the loan. Some lenders offer the option to pay an up-front fee for this insurance. Your lender should let you know how it will be handled.
Property taxes are added to the mortgage and held in escrow. When the tax bill is due, the lender will pay it. If there is an increase, you’ll usually be given the option to pay a lump sum to keep your payment the same, or the mortgage company will add a portion to the monthly payment to cover the previous and new increase.
Before closing, you should shop around for the best deal on homeowners insurance. You’ll pay one year up front then a portion will be added to each month’s payment to save for the payment that will be due in a year.
Even when you’ve shopped for the best deal at closing, you should still check prices again every few years. This can save you a lot of money but it is something that may be forgotten because it’s automatically renewed.
When you’re ready to speak with a lender for pre-approval, call Russ Tanner with Prime Lending. He has been in the mortgage business for many years and is very familiar with Athens real estate.
If you’re wondering what you need to have when you apply for a mortgage, this list should help.