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Principal, interest, insurance and escrow are all pieces of your monthly mortgage payment.

First, you need to understand the basic mechanics of the mortgage payment. Each month, you'll pay what feels like a punishing sum that consists of the following parts:

• Principal. This is an actual bit of the price of the house, a tiny chunk of the humongous loan you're asking for. When you first start paying on a mortgage loan, the amount of principal you pay off each month is tiny. That's because the bank wants its money first, which brings us to ...
• Interest. What the bank charges you for loaning you the principal. Your first mortgage payments consist almost entirely of interest; the farther down the road you get, the more the payment skews toward the principal.
• Private mortgage insurance (PMI). With some shrewd tactics and a little luck, you may be able to avoid this payment; if you can't wriggle out of it, it can cost you as much as $250 a month.
• Escrow. Most likely, you'll pay an amount into this account every month that goes to pay your county property taxes, city property taxes and homeowners insurance. All these bills actually come due yearly, but you pay a little at a time to ease the pain, and the escrow company takes care of it for you.

GO TO: Part 1: Evaluate Your Life and Finances

GO TO: Part 2: Shop for a Loan

GO TO: Part 3: Find a House

GO TO: Part 4: Close the Deal

GO TO: First-Time Homebuyer's Guide

More on FrontDoor:

• Search Homes for Sale
• Experienced Homebuyer's Guide
• Real Estate Survival Guide
• Home Finance Guide
• Moving Guide
• Tools and Calculators