The usual method of paying property taxes is to escrow a portion (usually 1/12) of the annual tax bill each month and pay it along with the monthly loan payment. The mortgage servicing company will then pay the taxes as they come due. If the tax bill goes up, your monthly escrow amount
will also go up. You may also be able to deduct the amount of the taxes paid off your income tax calculations. (always check with your tax professional about tax liabilities and benefits). If your down payment is less than 20%, you may also be required to pay private mortgage insurance. Private Mortgage Insurance (PMI) is insurance from private insurance companies used with conventional loans to protect the lender if the homeowner stops making payments on their home loan. PMI can be required as a condition of a loan and arranged by the lender at the buyer’s expense. If PMI is required, it typically makes up a portion of your monthly mortgage payment, in addition to your principal, interest, property tax, and homeowner’s insurance. People have been known to spend months looking for the best possible home and eventually find a good one. However, many of these individuals fail to understand the importance of finding a good loan. In the end, the new homeowner has a nice home, but a bad deal when it comes to the mortgage. Not many people have the capability to buy a house for all cash; most people will require a mortgage. Therefore, you not only need to go shopping for a house — but you also should go shopping for the best loan deal. There are different types of loans out there, and it’s best to check several and then compare them.
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