PITI – The Four Parts that Make up a Fayetteville TN Mortgage
If you are thinking about buying a home in Fayetteville Tennessee, chances are that you are going to need a mortgage to pay for that home.
It is important that you know what “PITI” means in order to estimate a house payment you can actually afford and make a fully informed home buying decision.
PITI is an acronym for the 4 parts that typically make up a mortgage payment – Principal, Interest, Taxes and Insurance. Otherwise known as the monthly “bottom line” or combined payment of a mortgage.
PITI is typically quoted on a monthly basis and compared to a borrower’s monthly gross income by computing the individual’s debt-to-income ratios - the percentage of your monthly gross income (before taxes) that is used to pay your monthly debts.
Lending institutions want to make sure that you can pay your insurance and property taxes, thus, they build those payments into your monthly mortgage payment to secure the loan.
- Principal – The part of your monthly payment that reduces the outstanding balance of your mortgage.
- Interest – The part of your monthly payment that goes toward the cost of borrowing the money.
- Taxes – The part of your monthly payment that goes toward property taxes charged by your local government. We typically collect a portion of these taxes in every mortgage payment and hold the funds in an escrow account for tax payments made on your behalf as they become due.
- Insurance – The part of your monthly payment that pays for homeowners or hazard insurance, which provides protection against property damage due to wind, fire or other risks. Insurance costs are usually collected and paid form and escrow account.
A common guideline for debt-to-income ratios is 33/38. A borrower’s housing costs consume 33% of their monthly income. Add monthly consumer debt and it should take no more than 38% of their monthly income to meet those obligations.
You can use this free Mortgage PITI Calculator to calculate and total the monthly principal, interest, tax, insurance, and private mortgage insurance payments that normally come attached to a mortgage.
Fayetteville offers a wide variety of new and resale properties. Homes range from one and two-story homes, gated communities, condominiums, townhomes, golf homes, equestrian properties, luxury real estate and properties with views.
Whether you are considering buying a home in Fayetteville Tennessee or selling your existing home, our goal is to provide you with expert advice and exceptional customer service every step of the way.
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