When you start house hunting, exchanging offers and counteroffers, and applying for a mortgage, you're probably thinking more broadly about the sale price, down payment and interest rate. But, in the end, it's going to come down to finding a monthly mortgage payment that fits your budget. As a homeowner, it's important to understand what goes into your mortgage payment as well as ways you can ensure you make all necessary payments on time.
The amount you pay each month is a combination of the mortgage principal, which is the loan itself, and the mortgage interest rate. Let's say, for example, you have a fixed-rate mortgage for $150,000 over 30 years at 4.164% APR. That will result in 360 monthly mortgage payments of $731. At the beginning of the loan term, your monthly payment will comprise mostly interest and a little principal. This is because you're paying interest on the full $150,000. As you continue to make monthly payments and chip away at the mortgage principal, you'll be charged less interest. At that point, more of your monthly mortgage payment will be going toward paying down the principal.
Once your mortgage is approved, you'll receive a payment book in the mail. You can use those tickets to mail a payment in every month. Alternatively, you can arrange for your mortgage payment to be automatically withdrawn from your checking account. Contact your lender or fill out the automatic withdrawal slip in the payment book to get this started. With automatic payments, you may be able to choose the date on which your payment will be paid so it fits into your budget. You can also rest assured that your mortgage payment will never be late since you don't have to remember to mail it in or worry that the payment will be delayed, putting you at risk of owing late fees or damaging your credit.
In its most basic state, a mortgage payment is a combination of principal and interest. But, many lenders also open an escrow account for borrowers to bundle homeowner's insurance, private mortgage insurance (PMI) and property taxes with their mortgage payments. With taxes and insurance automatically paid each month, you don't have to worry about missing a payment, which could cause gaps in coverage or penalty fees. Ask your lender if an escrow account will be set up for you, and what your options are should you ever want to opt out.
You can work with Citizens Bank to find a home loan and choose a mortgage payment plan that works for you and your needs. If you start the mortgage application process online, a home loan originator will reach out to you to complete your application and you can ask any questions you may have and plan out a payment strategy.