Taxes and Insurance|
You'll hear many terms as you work with your mortgage lender, and one of the most frequently mentioned is "PITI." This abbreviation stands for principal, interest, taxes and insurance.
The tax and insurance components of a mortgage payment are generally held by the lender in an escrow account. The lender pays any property tax and homeowner's insurance bills as they are due, ensuring they are paid on time.
A home buyer's monthly mortgage payment generally covers expenses through the escrow account. If you don't have your homeowner's insurance and property taxes paid out of a lender escrow account, your local government and your property insurance company will send payment notices directly to you. It is your responsibility to make sure you pay these bills on time.
If you're planning to purchase a condominium or cooperative, talk to your lender about how they view condo and co-op fees. Most likely, they are considered housing costs and not a part of PITI. However, this can vary from lender to lender.