Having a hard time finding the answer, maybe someone knows or can provide a source for the answer?
The options are:
a) principal, interest, tax & insurance
b) principal, rate, time & interest
c) title, closing costs, closing statement, & the deed
d) ARM, PMI, VA & FHA
My instincts tell me b, just cause it seems like these would be the essential elements, but I’m not finding this to be right anywhere…
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The payment consist of principal, interest and escrow for taxes and insurance.
I reckon it is A — certainly principal and interest, but often the lender requires the homeowner to pay taxes and homeowners insurance into an escrow account. Homeowner pays principal and interest, and extra for taxes and insurance in one payment.
Answer is (a), it’s even called “PITI”.
If you’re studying for Real Estate, this was taught week 1.
P I T I =
P rincipal
I nterest
T axes
I nsurance
It’s asking for elements of a mortgage payment, so the answer will be A. B would be how a mortgage payment is calculated and they added rate & interest (which are the same thing) to throw you off.
Regards…
(The answer is A)
The four elements of a mortage payment is PITI which stands for:
Principle: The part of the mortgage payment that represents the money you borrowed.
Interest: The part of the mortgage payment that is paying for the interest you owe.
Taxes: Part of some mortgage payments is placed in an escrow account and used to pay your property taxes, when needed.
Insurance: Part of some payments used to pay your private mortgage insurance when escrowed.
The answer B would be in the case of: Fianancing Techniques. C is referrring to Escrow, and D is about adjustable rate mortgages, private mortgage insurance and VA and FHA type of government loans. D is fake altogether because conventional loans require PMI if purchaser has < 20% down payment. Government loans have MIP mortgage insurance premium that must be paid at the time of loan orgination based on down payment. MIP is added to payments for the LOL. (life of loan).
If you had stated B, you would for example be saying:
Amortized loans uses a financing technique where the fully amortized loan or level-payment loan.The mortgaor pays a constant amount, ususally monthly. The lender credits each payment first to the interest due, then to the principal amount of the loan.