For most people, the mortgage payment may include three parts:
* A payment on the principal of the loan (that is, the amount borrowed);
* A payment on the interest;
* Payments into a special account (called an escrow account) that your lender maintains to pay for things like your hazard insurance and property taxes.
These elements are called P.I.T.I. (Principal-Interest-Taxes-Insurance).
The closing is the actual settlement of the loan. The mortgage lender gives an estimate of the closing costs, the monthly payment and other mortgage costs, usually within three business days after applying. The settlement process is governed by the Real Estate Settlement Procedures Act (RESPA) of 1974. The lender is required by RESPA to give the borrower a Good Faith Estimate of the settlement costs that he or she is likely to encounter.
