Owner financing in Dallas, occurs when the owner of a home finances all or a portion the sale of his or her own property. This is often referred to in real estate ads as "Owner Finance", "Owner Will Carry" or "Seller Financing".

This means that the owner of the property will, in effect, act as a bank and loan the purchaser all or part of the money needed to purchase the owner's property.

Anyone will be able to get into our Dallas owner financed homes as long as they have the required down payment, closing costs and are comfortable with the monthly payment.

We like the idea that we can receive a monthly income from a property even after we have sold it - and no longer have to worry about repairing leaky roofs or replacing dead water heaters and that's one reason we are willing to owner finance in Dallas.

There is a nice monetary inducement to the owner to carry paper as well - the owner can charge the buyer interest on the money that the owner is lending to the buyer. In this way not only does the owner collect a monthly mortgage payment on the owner finance property he or she has sold, but the owner collects interest as well, in effect increasing the owner's overall sales price of the property.

In order to protect ourselves with our Dallas owner finance, we require that the buyer make their monthly payments into an escrow account held by the note servicing company. We may also require the borrower to place a Quit Claim Deed into an escrow account with instructions that if a payment is late by a certain number of days then the escrow officer will automatically file the Quit Claim Deed, restoring the house to the former owner instantly.

This is rarely done on our owner finance properties but it certainly an option if we choose.
If this were to happen the buyer would not only lose title to the property but would also lose any and all payments already made on the property. This is a powerful incentive for the buyer to make all payments in a timely manner on their owner finance notes.

A more pragmatic reason, perhaps, why some homeowners agree to carry an owner finance note on their Dallas properties is to increase the universe of potential purchasers for their property. This means that a larger number of potential buyers are in the pool.

Additionally, when a Dallas seller owner finances a property there are usually no points and minimal closing costs for the buyer to pay, saving the buyer potentially several thousand dollars on the transaction.

While the Dallas owner finance seller of the property may charge the same interest rate that a bank or other financial institution would charge, it is sometimes possible for a buyer to actually end up paying a slightly lower interest rate if the seller finances the sale since more aspects of the sale are open to negotiation than may be possible when dealing with a traditional lender.

Your chances of finding an owner willing to owner finance in Dallas with no credit check is rare. We are one of one of the few home selling organizations that provide second chance financing to potential buyers with no credit check.

Trying to move out of your current situation and into a desirable home can seem like you're swimming upstream. You keep trying to improve your financial profile and just when you think that you can make the move, something happens that forces you back into the same old situation.

Lenders don't seem to understand. They expect perfect credit, lots of money in the bank and then maybe, and I mean maybe they will consider whether to give you a loan.

So you put off buying a home and you rent. You become frustrated knowing that you're not helping your family. You want another bedroom, more space, a back yard, a 2-car garage, etc. Once you begin renting, you never seem to be able to save any extra money for the loan financing requirements. The banks won't let you use "borrowed" money for the down payment. And just when you think you've got enough for a down payment, the rent goes up... or you need a bigger apartment... or whatever. And then you're back at square one, living in the same cramped place with the same neighbors. Wondering if you'll ever have the kind of place you deserve.

You Deserve a Better Home!

You may be tired of the same old space. Sure your apartment seemed big when you moved in, but now you realize that you're living within inches of "nosey neighbors". Paper thin walls...You can't make too much noise, stay up late, work on your car, paint the walls, get newer appliances, etc. without someone making a complaint. Or without checking with the apartment manager.

If you feel crowded now, what's it going to be like next year, or later? Maybe you're tired of living with relatives. Maybe you need space for your growing family. What if the rent gets raised by 20%, what will you do then? Move out? Find another temporary space?

Financial advisors talk about planning for the future, but you're having trouble keeping up with the present.
You sure don't receive any tax breaks for paying rent!

Sure you've looked at the new homes. The builders promise a super financing deal, but you know that even if you qualify, you'll still have lots of expenses that all new homeowners face. Landscaping, custom wall paper, garage door opener, appliances, etc.

Would you like to avoid those "new home expenses" by moving into a home that's a couple of years old.

If you could only find a complete house where you could move into where your credit was already approved.

A home that has all the extras included; a home where part of your payments goes towards the purchase.

Like we said, we're property investors. We buy and sell real estate as a personal investment, so we know the difficulties homebuyers' experience when they try to get home financing. That's why our program is successful.

You may still be in the "thinking about it" stage. Maybe you've tried talking with a lender... maybe you haven't decided you're ready to go that route yet.

While it can't hurt to talk with a lender now, do you have the financial profile suitable for a new loan? After all, we know that the lenders want only the cream of the crop? Right. I'm sure you heard the phrase, "banks only lend money to people who can prove that they don't need it!"

That's why we buy homes and makes them available to people just like you.

We've found a trend setting way to get you over the hump of home ownership. Here's how it works...

You never have to worry about improving your credit unless that is something you want to do. You'll still be living in an attractive home. Not renting. You'll be the proud owner of a gorgeous home in Dallas through owner financing.
We offer a proven way to beat the lenders' system of "get your money first and live in your home later".

Sometimes the reasons you can't get a home aren't so good at all... bankruptcy, divorce, job loss. We can deal with these issues.

Thinking about buying can quickly become wanting to buy... and it's amazing how fast "want to" can become "have to". Whatever the reason, it puts you in a pickle.

The Game Plan

What if we told you that we had a nearly new home, complete with all the extras that could be yours?

No sweat on the credit... we've got owner financing in place. No problem with the down payment; we can accept borrowed funds and our terms are flexible. No problem with the location; we offer homes in the nicest subdivisions. We can probably wrap up the whole thing within 48 hours. Would you perk up a little if that were the case?

A deed is a legal instrument used to grant a right. Deeds are part of the broader category of documents under seal. Deeds can best be described as quasi-contracts, requiring the agreement of more
than one person.

Deeds can therefore be distinguished from covenants, which being also under seal, are unilateral promises. The deed is best known as the method of transferring title to real estate from one person to another, often using a description of its "metes and bounds.

Beware of anyone who doesn't transfer property through a deed if you owner finance a home in Dallas.

The deed must indicate that the instrument itself conveys some privilege or thing to someone. This is indicated by using the word hereby or the phrase by these presents in the sentence indicating the gift.

The grantor must have the legal ability to grant the thing or privilege. The person receiving the privilege or thing must have the legal capacity to receive it.

A seal must be affixed to it. Most jurisdictions have eliminated this requirement and replaced it with the signature of the grantor. However, for conveyances of real estate, most jurisdictions require that the deed be acknowledged before a notary public or a civil law notary and some may require a witness or witnesses in addition.

It must be delivered to and accepted by the recipient. In the transfer of real estate, a deed conveys ownership from the old owner (the grantor) to the new owner (the grantee), and can include various warranties. The precise name of these warranties differ by jurisdiction.

However the basic difference between them is the degree to which the grantor warrants the title. The grantor may give a general warranty of title against any claims, or the warranty may be limited only to claims which occurred after the grantor obtained the real estate. The latter type of deed is usually known as a special warranty deed.

While a general warranty deed is normally used for residential real estate sales and transfers, special warranty deeds are more commonly used in commercial transactions. We use an all inclusive general warranty deed to transfer when we owner finance in Dallas.

Amortization sounds like some fancy French word. However all amortization is the distribution of a single lump-sum cash flow into many smaller cash flow installments, as determined by an amortization schedule. This makes it easier for you to pay back the large sum of cash over a period of time.

Unlike other repayment models, each repayment installment consists of both principal and interest. We use an amortization schedule to amortize your loan when we create and owner finance on your new Dallas home.

Payments are divided into equal amounts for the duration of the loan, making it the simplest repayment model. A greater amount of the payment is applied to interest at the beginning of the amortization schedule, while more money is applied to principal at the end.

We normally amortize a loan over 30,40 or 50 year terms. Although we notice most of our clients only live in their owner financed Dallas homes for 3-7 years.

They will either sell or refinance the Dallas owner financed home during that period of time.

A mortgage note is a promissory note associated with specified mortgage loan; it is a written promise to repay a specified sum of money plus interest at a specified rate.

While the mortgage itself pledges the title to real property as security for a loan, the mortgage note states the amount of debt and the rate of interest, and makes the borrower who signs the note personally responsible for repayment.

The terms of a note will include the principal amount, the interest rate if any, and the maturity date.

Included in your Dallas owner financing note will be provisions concerning the payee's rights in the event of a default, which may include foreclosure of the maker's interest.

Your note will be secured by a Deed of Trust in the event of nonpayment of your mortgage.

Your Dallas owner financed note will include a fixed rate interest with no balloon payments or pre-payment penalties.

Balloons are not just something you blow up.
If you are going to owner finance a home in Dallas please be cautious of balloon payments. A balloon payment mortgage is a mortgage which does not fully amortize over the term of the note, thus leaving a balance due at maturity. The final payment is called a balloon payment because of it's large size.

A balloon payment may have a fixed or a floating interest rate. An example of a balloon payment mortgage is the 7-year balloon, which features monthly payments based on a 30-year amortization. If you have a loan that is amortized over 30 years then that means that by making the regular monthly payments every month, your loan would be paid off in 30 years.

If the repayment agreement (Note) contains a balloon payment clause, then you will be required to pay the loan off in full in 7 years instead of the 30 year time frame.

As with any type of financing balloon payments do have their place depending on your goals. Just be sure that the seller of the Dallas owner financed home explains to you the terms of the balloon payment if there is one associated with the mortgage. Otherwise, your home can be taken from you if you are unable to make the balloon payment.

If there is a balloon payment associated with your Dallas owner financed home you can solve the problem by refinancing the home or by selling it. If balloon payments are your only option then I'd recommend a minimum 3-5 year balloon payment.

There is also what is referred to as a "reset option," the mortgage note "resets" using current market rates and using a fully-amortizing payment schedule. This option is not necessarily automatic, and may only be available if the borrower is still the owner/occupant, has no 30-day late payments in the preceding 12 months, and has no other liens against the property.

For balloon payment mortgages without a reset option or where the reset option is not available, the expectation is that either the borrower will have sold the property or refinanced the loan by the end of the loan term.

These loans make a lot of sense for individuals expecting a financial windfall at some point in the future. This might be due to a large tax refund, an inheritance, or an expected dividend. Whatever the source, if current cash-flow is not indicative of future capital holdings, a balloon payment may be an intelligent choice.

Many lenders will allow you to convert your initial balloon loan into a more traditional loan structure, on or near the date the balloon payment becomes due. Make sure this is an option beforehand, however, and be certain you are willing to risk refinancing at much higher interest rates when the time comes, before you make the leap.

Have you heard about the Subprime Implosion? Lenders are dropping dead like flies.

Let me tell you a little about what's happening.

Elimination of the "exotic" option-arm loans will put 60,000,000 homeowners in danger of losing their homes in foreclosure.

New federal lending guidelines will put the nail into the coffin for home ownership for many buyers.

The government is putting many subprime lenders out of business by shutting off the easy money faucet they had in order to do "easy" loans for buyers.

Buyers will once again have to QUALIFY for their mortgages based on verifiable income from their IRS tax returns.

IRS has already set up a hotline for lenders. For a very small fee, within 24 hours, the IRS will inform the lender of the income the buyer (or seller trying to refinance) reported on their tax return last year (or an applicable previous year).

Interest rates are going UP! This makes it even more difficult for buyers to qualify and may put most homes out of their reach.

As you can see, there won't be any more "easy, stated income, stated assets" loans. That's history. And all of this will put the majority of sellers and buyers in jeopardy.

To make things worse, there are huge changes coming in how credit scores will be determined. Utility bills will soon become part of the scoring system.

Those buyers and homeowners with a poor payment history on their utilities may find their scores dropping down. Previously they may have kept up with payments that were being reported and were lax about the utilities. That could come back to bite them.

Who is creating this mess? The CONGRESS that has (as of this writing) only a 14% approval rating! Those politicians are trying to destroy the real estate business.

The worst part is, they expect you to vote for them again and put them back in office! Don't do it!!!

So if your credit is scarred you don't have many options to becoming a Dallas homeowner unless you find someone who is willing to owner finance you.

If the traditional lender does finance and your credit is less than perfect be prepared for super duper high interest rates and at least 20% down not to mention closing costs.

Just type in the words "subprime lending" in Google and read some of the articles. It's getting tougher to become a home owner unless you have spotless credit or choose an alternate method such as owner financing in Dallas.

Reason #1

You do not qualify for traditional loans:
You may have poor credit due to late payments, collections or even a past bankruptcy. And, this may prevent you from qualifying at some of the best rates available. This is when you may opt for Dallas owner financing.

We do not pull credit reports so you never have to worry about your credit. Also, if you are self-employed and cannot prove your income or else if you have taken up a new job and do not comply with the strict lending rules, then purchase through Dallas Owner Financing may be the right option for you.

Reason #2
You cannot afford to pay closing costs exorbitant closing cost of 3-4% of the purchase price. You may not have enough funds to pay the closing costs on a mortgage or you may like to avoid paying such a large sum of fees.

This is where owner finance can save you thousands of dollars in loan costs. If you owner finance your Dallas home through us our closing costs are less than 1% of the purchase price. You will again save yourself thousands of dollars by not paying all of those junk fees.

Reason #3

You need to get into the home fast. You may wish to avoid the lengthy loan process and close on the home within a few days. This can be done through Dallas owner financing. We can usually close within 24 to 72 hours. We have been known to close the same day in extreme situations.

Reason #4

You want to avoid all of the hassles of traditional lending. Hassles such as providing two years of verifiable employment, two year of verifiable rental history, asset verification, home inspection fees, appraisal fees, and credit worthiness. With Dallas owner financing we have taken all of the sting out of buying a home and made it a simple and easy process.

What is going on in the world of mortgage financing? The media would have you think that Chicken Little has spoken and the sky is falling down. Let's take a look behind the scenes to see what's really happening.

A few years back, Wall Street held a private meeting with a ton of mortgage bankers and told them to "Create new products with higher returns and we will buy them."

"Your wish Mr. Wall Street is my command" said the mortgage bankers. The industry went wild creating higher risk products that paid higher returns such as Stated Income Loans. These are the type of loans that if you can fog a mirror you can get a loan.

Don't get me wrong there is nothing inherently wrong with these types of loans but they were doing them with buyers who had no skin in the game.

To owner finance a Dallas home with us you've got to have a minimum of 5% in the game to even get in the ballpark. Make sense?

See when you accept buyers with low credit scores and no money down even with higher rates you're own your way to a mortgage meltdown fiasco.

Everyone was running around like there was no tomorrow. Investors were happy with the higher returns because the increased risk and buyers were happy to get into homes.

Then the chickens came home to roost. Markets started to decrease in value. A big wake up call came when homeowners with Adjustable Rate Mortgages (ARM's) went to refinance and COULDN'T because most of these loans were originated with 100% financing.

THEY HAD ABSOLUTELY NO EQUITY.

Foreclosures begin to shoot through the roof. The Investors saw the high default rate on loans and begin to pull the plug on lending. The result is a major restructuring on lending especially subprime loans. These are loans for people who's credit is less than perfect.

Right now you will see that the pendulum has swung in the direction of conservatism. Now these types of loans require a higher credit score and a small down payment.

So is the sky really falling? No. Especially if you elect to owner finance a Dallas home with us. The market is simply adjusting to match the true risk associated with real people living life.

You don't have to wait until the market adjusts you can become a proud homeowner today by owner finance your Dallas home with us.

Figuring the payments on a loan

You can use a spreadsheet program to figure out the payments on a loan. Open up your trusty Excel spreadsheet, and type in the following:

=PMT(A%/12,B,C)

Instead of typing the letters A, B, and C, use these figures instead:

A = Enter the interest rate of the loan. Note that the formula divides it by 12 because you want the monthly interest rate, not the yearly interest rate.)

B = Enter the number of months you'll be making mortgage payments for: 360 for a 30-year loan or 480 for a 40-year loan.

C = Enter the amount of the loan. This is the price of the house, minus the down payment.

Note that the result is a negative number. Don't worry about that. If it bothers you, put a minus sign between the = sign and "PMT".

Here's an example. Let's say your owner finance home costs $140,000. You're putting 5% down ($7,000), so we will owner finance $133,000. The interest rate is 9% and it's a 30-year loan. So we've got:

=-PMT(9%/12,360,133,000)

And the answer is $ 1070.15 a month. But wait, your mortgage payment also includes taxes and insurance. To find amount of the taxes, call the County Tax Assessor. To find the cost of insurance, call an insurance agent and get a quote.

Let's say that taxes are $2500/year and insurance is $1100/year. That's $3600/year together, or $300/month. So your total monthly mortgage payment is $1370.15 ($1070.15 from what we figured earlier, plus $300 for taxes and insurance.)

We only require 5% down of the purchase price if you are owner financing a home from us in Dallas. We thought it be a good idea that we give you a few ideas on how you could save for your down payment.

Please keep in mind we do not verify where the money originated. Therefore, it could come from anywhere as long as you have the 5%.

Tip #1
Start saving as much as you can as soon as you can. We already told you that you will need a minimum of 5% down, make it a priority and find ways to save money such as foregoing a new car or a vacation trip.

Tip #2
If you have enough equity in your 401(k) retirement plan at work, you can borrow the money from your account. You will be charged prime rate, with possibly a small margin added on, and you can have the payments from this "loan" deducted from your paycheck through payroll deduction plans.

Tip #3
Borrow the down payment from family members or relatives and pay it back monthly.

Tip #4
A susu savings plan consists of a group of people who pool their money and distribute it among themselves periodically, one by one. For example, a dozen people might contribute $1,000 each into the pool every month for a year. In the first month, one person gets $12,000. The next month, the next person gets $12,000, and so on. At the end of the year, each person has contributed $12,000 and received $12,000.

My name is Rickey Benns. If you would like to buy a home, but can't qualify for a conventional mortgage, you've come to the right place.

I am a real estate investor and I buy and sell homes... I am not a real estate agent. By using my special financing, you can buy a home from us.

It does NOT matter if you have bad credit, bankruptcy, late payments, judgments, liens, tax problems or charge offs, you can still buy one of our homes. It doesn't even matter if you have verifiable income. We believe that *everyone* has a right to own their own home.

We are constantly getting new homes in the Dallas/Fort Worth area.

We've made the process of becoming a home owner very simple.

1. Go by and visit the home to see if it fits your family needs.
2. Complete a buyer information (this form is for information purposes only-we will not pull your credit) form and enter into a purchase and sales agreement.
3. If you like the house and would like to take it off the market immediately then you will need to give us a check $1,000 which takes the home off the market for 2 weeks. If you have the entire 5% plus $1,199 for your closing costs we can get you in the selected home with 24-48 hours.
4. Give us your signature on a few docs and collect the keys and garage openers to your new home.
5. Move into your new home and your deed showing proof of ownership should arrive in 3 weeks or less.
6. Enjoy your new home.

A buyer usually seeks owner financing if they cannot qualify for a conventional bank loan due to an unsavory credit history (or the lack of one) or when assets being purchased are not suitable to conventional lending.

A buyer may be self-employed and writes off all of their expenses to pay less taxes therefor they do not show enough income on their tax return to qualify for a home.

In another situation a person may qualify for the loan but the bank wants the buyer to put 20% or more down to be able to purchase the home.

A buyer can usually get more favorable terms with owner financing and alleviate all of the hassles of a traditional bank loan.

While each circumstance is different, most of the time it is a combination of these reasons.

Mortgage note is an agreement that offers a mortgage as proof of the debt and defines the terms under which the mortgage is to be repaid. It states the debt and the interest rates of the agreement.

This note can be sold to a note buyer. Note buyers can buy the entire note or a partial note known as a partial purchase. Let's say there are 280 payments left on the mortgage. A note buyer may purchase the next 100 payments of the remaining 280 payments. After that time the payment stream will revert back to the original note holder.

I hope not! Your time is valuable, and you need to get paid for it! All of us have only 24 hours a day and "spinning wheels" is not something we can afford to do, correct?

However, it's the nature of your business that some buyers are not able to qualify for a loan%u2026 despite their sincere desire to own a home and even though many of them were in fact "pre-approved" before they called you%u2026

The recent slow down in the housing market doesn't help us either%u2026 on top of it, the "subprime meltdown" and changes in the lending industry are preventing even more potential buyers from getting into a home. All those changes are not helping you make a living!

Here's how you can get paid Realtors,
You bring us your buyers that are UNABLE to qualify and we pay you for that!

Your goal should be to spend your time working with those buyers who are able to qualify for a loan and buy! However, due to the recent market changes it's very common that many potential buyers just can't buy%u2026 and that is when we step in! So, you get paid for bringing them to us, they get a home and we sell our houses! Better said, a "win-win-win" scenario!

That's a very interesting question. Foreclosure stay on your credit record for 10 years. Therefore if you bought a home through traditional financing they would either deny you all together or tell you that you needed at least 30-35% for a down payment.

Keep in mind in addition to your down payment you would still need to go through all of the steps of proving your income, where you've lived and worked for the past two years.

If you owner finance your home through us then the you can still buy a home even if you were foreclosed on last year as long as you meet our down payment requirements.

We believe everyone deserves a second chance to become a homeowner. Unfortunate things happen to good people.

In Texas we use what is called a Deed Of Trust. In some states it may also be called a Trust Deed. It's the same document with a different name.

It is the security for your loan. It is the document that is recorded in the public records. This document allows the seller to reclaim the property if nonpayment of your loan.

A deed of trust contains three parties:

* The Trustor, which is you, the borrower

* The Trustee, which is an entity that holds "bare or legal" title

* The Beneficiary, which is the lender

The deed of trust is an instrument that identifies the following:

* Original loan amount

* Legal description of the property being used as security for the mortgage

* The parties

* Inception and maturity date of the loan

* Provisions of the mortgage and requirements

* Late fees

* Legal procedures

If a loan contains a prepayment penalty clause in the note it allow a seller (lender) to collect extra money if the loan is prepaid above a certain percentage.

This money usually amounts to six-months of unearned interest. If a $100,000 loan at 6% is paid off within the first five years, for example, the prepayment penalty would equal $3,000.

This allows the lender to have the ability to be assured that they will yield a certain return from that note during a five year period whether you stay or cash out the loan.

We currently do not include a prepayment penalty with any of our notes.

What if you could take your mortgage payment and put it into your pocket instead? Well you can and I'll show you how. The bottom line is this, if you aren't trying to pay off your mortgage early or adjust your mortgage payment you're leaving MEGA-BUCKS on the table.

There are really only 6 ways that you can make a mortgage payment that will help you pay off your mortgage early. Some are good, some are not. It really just depends on your financial situation and how much you're willing to sacrifice.

Regardless of your situation there is ALWAYS a method or two that will work perfectly for you. So here are your options:

1 - Use a biweekly mortgage payment plan (doesn't seem like much but works well)

2 - Make an additional mortgage payment to the principle each month (3% rule)

3 - Refinance with a traditional lender at a lower rate and keep the monthly mortgage payment the same

4 - Make a lump sum mortgage payment to the principle (maybe with a salary bonus you get)

5 - Refinance to a 15 year mortgage (the mortgage payment increases but it gets the job done)

The most important thing to remember about choosing to pay off your mortgage early is to understand what it will do for you financially in the future, and then to be able to compare that to what the mortgage payment method is doing to you financially right now.

Often, making the decision on which mortgage payment method to use comes down to your family and lifestyle. Ask yourself the following questions before deciding which mortgage payment method makes the most sense for you.

Do you have a retirement set aside?
Do you have a college fund for your kids?
Do you need/want a new car?
Does your spouse want to go on a vacation?
How much money do you want to save and how badly do you want to pay off your mortgage early?

It may seem hard to choose which one of these mortgage payment options will work best for you, but if you're truly serious about taking control of your financial life it won't be tough.

Deeds of trust contain a trustee, an independent third party that does not represent the borrower nor the lender.

The trustee is an entity, generally a title company, that holds the "Power of Sale" in the event of default.

The trustee also reconveys the property once the deed of trust is paid in full.

In the event of a default, the trustee files a Notice of Default; however, in most instances, the trustee will substitute another trustee to handle the foreclosure under a Substitution of Trustee.

After the 90-day period in the public records in Texas only, and a 21-day publication period in the newspaper, the trustee then has the power to sell the property on the courthouse steps without a court procedure.

During the three months following recordation of the Notice of Default, the borrower can redeem the property by making up the back payments and paying the trustee's fees.

Once the trustee sells the property at a Trustee's sale, it is final.

Buyers always ask how much of an earnest money deposit is required? Typically, there is no set requirement but we generally like to get at least $1,000 to take the property off the market for at least 2 weeks.

Bear in mind, however, that the amount of your earnest money deposit depends primarily on your situation and when you desire to close.

What is an Earnest Money Deposit?

It's a good faith deposit but not to be confused with a down payment. When buyers execute a purchase contract, the contract specifies how much money the buyer is initially putting up to secure the contract, to show "good faith," and how much money all together will be deposited as a down payment.

PITI stands for principal, interest, taxes, and insurance. It is basically your monthly payment.

Principal is the actual amount of your loan. If you borrowed $200,000, the principal is $200,000. Every time you make a monthly payment you're paying a part of the principal and reducing the amount you owe on the home and increasing the part that you own (your equity.)

Interest is the amount that the lender charges you for borrowing the money (a percentage of the principal). Interest can change your monthly payments when interest rates change if you have an adjustable rate mortgage.

Property taxes are made on real estate generally at county level and used to fund schools, road work, police and municipal services. Property taxes vary by county and are part of the equation that determines your mortgage payment.

Homeowner's insurance may be collected by your lender and paid to your insurer.

If your property is destroyed by a fire, the seller will have lost his collateral. Also if your taxes are left unpaid, your state can foreclose on your property in order to obtain payment and the seller could lose his collateral. Because of that the lender wants to make sure your insurance premium and property taxes are always paid.

The seller collects your property taxes and your insurance premium in a special account. The money in the account will be used to pay your taxes and insurance premiums when they become due. The amount in this account is based on the estimated amount necessary to pay these obligations each year.