There are a lot of different loans available for home owners, and they all have different rates and requirements. Discovering which mortgage is right for you can be a complicated process, so make sure that you work with a real estate agent who can introduce you to the right lender!
The principal of your home loan is the agreed-upon cost of the home, minus the down payment that you put down on the property. You can think of the Principal as the “final sum” of your house, against which you are paying monthly. As a rule, a higher-cost principal means higher monthly payments.
Because the principal is the home’s cost after subtracting the down payment, the amount you put down on a home can change your monthly payments. The amount that you have to put down on a home changes based on your loan and the market.
The more money you put down on a home, the lower your monthly payments are going to be. Work closely with your agent and lender to find the balance that works best for you.
Though your mortgage payments will likely be the highest monthly cost for your home, there are others to consider.
Some loan types may require you to purchase Private Mortgage Insurance (PMI) if you do not meet certain requirements. In a conventional home loan, PMI is often required when putting down less than 20% of the purchase price.
Private Mortgage Insurance is intended to protect the lender on the off-chance that the loan defaults. Essentially, it is a safety measure to help you get approved for a loan.
When you buy a home, you are also buying a spot in a community. Many subdivisions and neighborhoods will have Home Owner Associations (HOA), organizations that aim to protect residents and home values in the neighborhood. Similarly, condominium communities almost always charge monthly fees to help maintain amenities and communal spaces.
Make sure to speak with your agent about these monthly costs during the search so you can budget appropriately!