Buying a House

The monthly amount that is set aside for taxes and property insurance is held in an Escrow account by the bank on your behalf. When the property tax bill and the insurance policy is due, the bank will pay these bills from your escrow account.

Housing and Lending Terms

Fixed Rate Mortgage – Loan where the interest rate is the same for the entire length of the loan (usually 30 years). The principle and interest payments are the same amount every month, and your payment won’t change if interest rates go up. This type of mortgage is ideal for homebuyers who plan on remaining in the home for a long time.

Adjustable-rate Mortgage – Loan where the interest rate changes, depending on the type of loan you choose. Some loans offer an initial fixed rate period (3,5,7 or 10 years). These loans frequently offer a lower interest rate than fixed-rate mortgages. If rates go down, your monthly payment could go down, but if rates go up, so could your payment. This type of mortgage is ideal for homebuyers who may relocate within 3-5 years.

Equity - the value of the home, less any remaining mortgage payments

Escrow Account –an account held by your mortgage company to pay for fees and taxes associated with your mortgage (typically including closing costs, property taxes, home owner’s insurance).

Private Mortgage Insurance (PMI) – An additional insurance program that will be applied to your monthly mortgage costs if you have than 20% of the home value in equity. Once you have at least 20% equity, you may have the PMI taken off of your monthly payment.