The actual payment of your first time mortgage will occur on a monthly basis over a specified period of time. Since you don’t have all the cash up front to buy a home, which is why you apply for a mortgage, it is well understood that you also don’t have the ability to pay the mortgage back in one payment.
	So a schedule is established over a number of years in which you pay the loan back through a number of smaller, regular payments. These mortgage payments are actually an aggregate of a couple of elements. There is the prinicipal. This is the payment portion that actually goes to paying down your outstanding loan amount. Then there is the interest, which is the loan profit for the lender. Next come taxes. Every property is subject to taxes and assessment from local government, so many lenders want to make sure you pay them to protect the property. Remember, the collateral for your loan is ultimately the house, so a lender doesn’t want to see it get lost to the city for back taxes. Finally, there is the regular homeowner’s insurance. Again, the lender doesn’t want to see the collateral get lost to a fire or some other disaster, so they require insurance coverage. That cost is included as well. Thus it is quite easy for an estimated $1,700 loan payment to actually end up being a $2,200 mortgage payment with all the other costs involved. All of these costs combined are referred to as PITI (principal, interest, taxes, and insurance). In addition, depending how much money you have for a down payment, if your beginning purchase in the house is less than 20 percent you will likely be required to pay for mortgage insurance. This coverage is an additional protection for the lender in case you default on your loan. Without the coverage, they would likely lose their money since the builder has already been paid and you’ve become a deadbeat. The insurance protects them until you have paid a sufficient interest in the house that it would be a significant loss for you to default as well. Statistically, lenders find that folks who have more than 20 percent ownership tend to finish their loans and not go into default.