Definitions:

Principal & Interest: The combined amount paid to the lender each month that consists of the principal payment, which is the amount applied towards the repayment of the loan balance, and the interest payment, which is the lender’s monthly charge for issuing the loan. Loans are structured such that at the beginning of the loan term, payments will consist primarily of interest payments and at the end of the loan term, payments will consist primarily of principal repayment.

Property Tax: Government taxes assessed on the property as a percentage of the total property value. Taxes are calculated on an annual basis, but can be paid monthly as part of the total monthly payment.

Homeowners Insurance: Insurance required by lenders to protect homeowners and lenders from damage or loss to the home, its contents, or other personal property

Mortgage Insurance: Insurance to protect lenders against default on the loan. Lenders typically require insurance if the down payment is less than 20% of the purchase price. Mortgage insurance can either be purchased from the FHA (mortgage insurance premium, MIP, for FHA loans) or through private insurers (private mortgage insurance, PMI). Lenders are required to cancel mortgage insurance on most home loans once the loan value equals 78% of the home value. Borrowers who wish to cancel earlier can terminate mortgage insurance when their loan value equals 80% of the home value given they have a good payment history.


Monthly Payment:
 The total amount of the recurring payments paid on a monthly basis for the lifetime of the loan. It includes the monthly principal and interest payment on the loan, as well as recurring taxes, homeowners insurance payments, and mortgage insurance payments. Since the monthly payment is an estimate, the actual monthly payment may be higher. Note: taxes, and insurance, and dues can be paid separately and may be paid semi-annually or annually rather than monthly.