Components of a Mortgage Payment: PITIA

• P stands for Principal or the amount you borrowed.
• I stands for Interest.  Lenders charge interest for the money you are borrowing. The interest generally reflects prevailing market rates based on investor demands.
• T is for property taxes.
• I represents Homeowners Insurance premiums (hazard insurance), which is mandatory.
• A stands for Association, as in homeowners association. For some residential properties, HOA dues are required.

Fixed Rate vs. Adjustable Rate

• With a fixed-rate loan, the interest rate charged by the lender never changes over the life of the loan. That means the P (principal) and I (interest rate) portion of your PITIA payment will not change. However the T (taxes) and I (insurance) portions may change if your taxes or insurance premium change. Many people prefer the stability of a fixed-rate loan.
• With an adjustable-rate loan, the interest rate can increase or decrease. There are a large variety of adjustable-rate mortgages (ARMs).

Government Loans vs. Conventional Loans

• Government loans include VA loans guaranteed by the Veterans Administration, FHA (Federal Housing Administration) loans administered by the U.S. Department of Housing and Urban Development (HUD) and USDA Rural Loans insured by the U.S. Department of Agriculture.
• If a loan is not insured or guaranteed by a government agency, it is considered to be a conventional loan. These loans are often purchased by Fannie Mae and Freddie Mac, although this purchase is typically invisible to the member. If you have less than a 20 percent down payment, you will likely need private MI. The advantage of MI is that you need less upfront cash and can buy your home sooner.

Length/Term of the Mortgage

The period of time during which you pay back the loan will also determine the amount of your payment. The longer the term of the loan, the lower the mortgage payments. For that reason, many first-time homebuyers prefer a 30-year loan. However, rates for shorter terms (including 15-year loans) are generally lower and build equity faster.