A home mortgage is basically the gap between the money you have for a down payment and the money you need to borrow from the bank. The higher a down payment you possess, the less you will have to borrow for a home mortgage. This is always good news. As well, the higher your down payment, the lower will the monthly payments be on your home mortgage. Another piece of good news!

Your bank uses a system known as PITI (Principal, Interest, Taxes, and Insurance) to figure out what your home mortgage will be. This will also establish your monthly payments. Let us take a closer look at PITI.

Principal
The principal of your home mortgage is the amount of money that you borrow from the financial institution to buy a home. It is fairly self-explanatory.

Interest
Most people cringe at the thought of interest. Interest is charged on every loan including your home mortgage. The interest you will be charged is contingent upon a variety of factors including the principal of your home mortgage, the interest rates determined by the banks as well as interest rates that are set by the federal government. If your home mortgage is an ARM then your interest rates will fluctuate.

Taxes
Taxes are an inevitable part of having a home mortgage. A percentage of the property taxes on your new home will be included with your monthly home mortgage payments. The taxes are either placed in escrow or are kept by a third party until they are due.

Insurance
Insurance is as essential to buying a home as is qualifying for a home mortgage. Insurance can help to put your mind at ease in the event of an unforeseen event or accident. The lender of your home mortgage will feel more secure as well. The amount of insurance you take out for your home can have an impact on your monthly home mortgage payments. It is wise to get the best coverage possible in terms of acts of nature, fire and theft.

Closing Costs
Just as the name implies, closing costs are the fees and required taxes that must be paid once everything to do with your home mortgage and the buying of the home has been completed. Closing costs have to do with paying all of the people that have worked for you to obtain your home mortgage, not to mention the real estate agent(s) and your lawyer.