Editorial

Front Page - Friday, September 17, 2010

Real Estate Facts

The impact of escrow and pmi

Elwynn Schwartz

As you plan to buy a home, seek pre-approval for financing so that you’ll know how much home you can afford and how much to budget for monthly mortgage payments. Aside from the financed amount, some other regular expenses associated with homeownership will also impact your payment amount.
First is homeowner’s in-surance that provides protection against fire and theft. Flood insurance is another beast entirely, and may be required depending on your new home’s location. Remember that you can save money by carrying your auto and homeowners insurance policies with the same company.
Just like insurance, your lender also collects funds each month for property taxes, but you’ll appreciate paying them if you ever need to call the police or fire department, or send your kids to a local school! The lender will hold the insurance and tax funds in escrow until the bills are due to be paid on your behalf.
Finally, if your down payment is less than 20 percent of the loan value, you’ll likely pay PMI, or private mortgage insurance early on. PMI is insurance for the lender against your risk of default, and might add a couple hundred dollars to your payment, depending on the size of your loan.
Don’t worry; these costs are bearable as long as you’re prepared for them and you do your planning before making your purchase.
Elwynn Schwartz is the owner of Chattanooga Real Estate Consultants and may be reached at 423-894-3050.

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