June 2015

Homer Simpson’s Guide To Mortgage Payments

Homer Simpson’s Guide To Mortgage Payments

(image source: The Simpsons/FOX. All Rights Reserved.)

‘To start, press any key’ – Where’s the “ANY” key?!” – Homer Simpson

If you’re beginning the home buying process, you might feel a tad overwhelmed.

Mortgage payments puzzle you.  You don’t know what home loan option is best for you (are there any first time home buyer programs?).  And you’re wondering if you can handle the payments.  You’ve got a plethora of questions.

That’s where we come in.  To quench your thirst for understanding what you are paying for, we’ve created Homer Simpson’s guide to mortgage payments – simple and deliciously easy to digest…like donuts.

What A “PITI”: A Mortgage Payment Breakdown

First things first: what’s in a mortgage payment?  (I dunno)  Luckily for you, it spells out an acronym = “PITI”:

  1. Principal
  2. Interest (Mortgage) Rate
  3. Taxes
  4. Insurance

Now that you know what makes up a mortgage payment, here’s what it actually means:

1. Principle

If you’re familiar with credit cards (hopefully not too familiar – good FICO scores lead to lower mortgage rates and saving you money over time), the same concept applies.  The principle is the actual amount you borrow for the home of your dreams.

2. Interest (Mortgage) Rate

You’ll watch the news and hear people talk about interest rates or watch a commercial about taking advantage of low mortgage rates (not now…but right now).

If you’re wondering whether they are the same thing (DING DING DING), your assumption is correct.

An interest rate is what a lender like Get A Rate charges for a home loan.

img 70 NEW Rent vs Buy Calc

3. Taxes

Pretty much what it sounds like – these are the property taxes on the house you are buying.

And last but certainly not least:

4. Insurance

If you have car insurance or want health coverage for when you get sick, there’s also insurance for your home aptly called homeowners insurance.

It pretty much works like how car and health insurance: homeowners insurance is to protect the homeowner should anything happen to your beloved home.  So if any physical damages happen to the house, you are protected.

Some tidbits of information about insurance:

img 5 homer simpson 1


SPECIAL NOTE:  if you’ve heard the term “Private Mortgage Insurance” also known as PMI, it is completely separate from PITI.  PMI is to protect the lender when a homeowner defaults on payments.  If you are looking for a No PMI option, speak to a Home Loan Expert today.

And that, my home buying friends, is Homer Simpson’s guide to mortgage payments.  (Simple, right?!)

img 65 Need To Get Pre Approved Get A Rate

Was this article helpful?

Related posts
Refinancing Assumptions
November 2019
Refinancing Assumptions

Ooooh… There are many scary urban-legends about Refinancing. Well, it’s time to call in the mortgage Myth...

RefinancingTools
FHA Loans: Benefits & Eligibility
March 2019
FHA Loans: Benefits & Eligibility

FHA loans allow you to purchase or refinance a house with financial assistance. These loans are backed by th...

Tools
Energy-Efficient Mortgage (EEM) Benefits
March 2019
Energy-Efficient Mortgage (EEM) Benefits

Energy-Efficient Mortgage (EEM) Benefits An EEM is designed to make it financially possible for you to hav...

Tools
How Your Credit Score Affects Your Mortgage – Advice from a Mortgage Company
March 2019
How Your Credit Score Affects Your Mortgage – Advice from a Mortgage Company

Do you know what your credit score is? Or why it's important? Many first-time homebuyers ask a mortgage ...

Tools