[vc_row][vc_column width=”1/1″][vc_column_text]Home mortgages and monthly payments of mortgages can feel overwhelming and complicated. Oftentimes, though, with a good explanation of what’s really going on, you can learn to handle home mortgages and all the other costs that come with home ownership with confidence and assurance that you won’t walk away blindsided by the outcome or facing unexpected costs.

With this in mind, Elevation Mortgage wanted to explain to you the basics of thinking through a home mortgage, monthly payments, and other home costs today on the blog.

Purchase Price vs. Actual Monthly Payment – The Difference

Many new homeowners assume that a home mortgage and its monthly payments are just derived from the purchase price: the total loan minus the down payment. You then add the interest rate to that purchase price and divide the sum over a 15-year or 30-year time span; the monthly payment for home ownership then becomes that divided sum every single month.

Fairly straightforward, right? Not completely.

What many homeowners need to focus on is not the purchase price but the monthly payment of the mortgage along with other costs that will be associated with that monthly payment. And there are a few other important factors that will be added to that payment each month.

What Does a Monthly Payment for a Mortgage Entail?

When you’re thinking about your monthly mortgage payment, here are a few things to consider.

Mortgage Insurance (MI) or PMI

Mortgage insurance (MI)—often called private mortgage insurance (PMI)—lowers the risk for the lender, allowing you to qualify for loans you might not be able to qualify for otherwise. In most cases, if you can’t put down 20% of the purchase price in a down payment, then you will be required to pay for MI. Mortgage insurance increases the cost of your loan, and it will be included in your total monthly payment that you make to a lender, closing costs, or both. And it’s important to clarify that this insurance protects the lender, not you—and if you miss mortgage payments or are late, then your credit score will be affected.

Home Insurance

Unlike cars, you aren’t legally required to have home insurance. However, most mortgage companies will make you have home insurance to protect your house in case of damage or natural disasters or they will not agree to give you a loan. If you want to take out a loan, then they will make you have insurance or will put forced-placed insurance on your home. You can get home insurance through insurance companies (we recommend Brian Galetta with Farmers Insurance or Richard Kiedinger with Allstate)—or mortgage companies will often have options to handle home insurance, too, giving you less individual payments to worry about.

Homeowner Association Fees

If you end up buying a home or condo in a Homeowner Association (HOA), then you need to think through monthly fees that will be associated with your HOA. Oftentimes, HOAs have great amenities like swimming pools, clubhouses, parking gates, etc., and everyone in the HOA is expected to share in these expenses. Theses monthly fees can range anywhere from $75-$600. It’s also important to note that if unexpected expenses come up (like storm damage to that amazing community pool), then your HOA expenses may rise to help out with the costs.

As with everything in life, things are often a little more complex than they seem—so if you have any questions, don’t hesitate to contact Elevation Mortgage and ask![/vc_column_text][/vc_column][/vc_row]