Frequently Asked Questions
What's included in a house payment?
Typically PITI (Principal, Interest, Taxes, Insurance). If down payment is less than 20%, add PMI. Some properties have HOA fees. Utilities and maintenance are separate expenses you should budget for but aren't part of the mortgage payment.
How is property tax calculated?
Based on assessed home value and local millage rates. Rates vary dramatically by location—0.5% to over 2% annually. Enter your local rate or estimate 1-1.5% as national average. Taxes usually increase over time as home value rises.
Why does my payment go to escrow?
Lenders collect taxes and insurance monthly, hold in escrow account, and pay when due. This protects their collateral (your home) by ensuring taxes are paid and insurance maintained. You can't opt out of escrow with most loans under 20% equity.
Can I remove PMI from my payment?
Yes, once you reach 20% equity (80% LTV). Request cancellation at 80% LTV—lender may require appraisal. Automatic termination at 78% LTV of original value if current on payments. Can't remove on FHA loans—requires refinance to conventional.
What's the difference between P&I and PITI?
P&I is just Principal and Interest—your base loan payment. PITI adds Property Taxes and Insurance. PITI is what most people mean by "mortgage payment." Lenders use PITI for qualification calculations (28% front-end DTI).
Are HOA fees tax deductible?
Generally no for primary residences. HOA fees are personal expenses, not deductible. However, if you rent the property, HOA fees may be deductible as rental expense. Some special assessments for capital improvements might add to cost basis when selling.
Why did my house payment increase?
Most commonly: property tax increase, insurance premium increase, escrow shortage from previous year, or ARM rate adjustment. Fixed-rate P&I never changes. Escrow analysis annually adjusts for tax/insurance changes. Expect gradual increases over time.
How much should I budget for maintenance?
Rule of thumb: 1% of home value annually for newer homes, 2-3% for older homes. $400k home = $4,000-12,000/year. Budget monthly so you're prepared. Create separate savings account for home repairs and maintenance.
Is homeowner's insurance required?
Yes, lenders require it to protect their investment. Even without a mortgage, it's highly recommended. Replacement cost coverage recommended over actual cash value. Shop around—rates vary significantly between insurers.
What happens if I don't pay property taxes?
Local government can place tax lien on your property, charge penalties and interest, and eventually foreclose. Lenders pay delinquent taxes from escrow and bill you, or may call the loan due. Never skip property tax payments—consequences are severe.
Can I pay my own taxes and insurance?
With 20%+ equity, you can often waive escrow and pay yourself. Requires fee (0.25% of loan amount typically). Risk: missing payments could result in tax lien or lapsed insurance, endangering the property. Most homeowners prefer escrow for simplicity.
Why is my first payment higher?
At closing, you prepay interest from closing date to month-end, plus fund escrow account with 2-6 months of taxes and insurance. First regular payment due 1-2 months later. This "prepaid" amount is part of closing costs, not your monthly payment.