PITI, which is short for "principal, interest, taxes and insurance," is an essential term to know for anybody seeking a mortgage loan. The acronym refers to the relationship between these four numbers expressed in a ratio and can tell lenders about your financial status. Here is a breakdown of the term and why it matters to potential homeowners and borrowers:
Principal
The principal is the amount of a loan before adding any interest. When you make a down payment on a mortgage or loan, the amount is deducted from the principal. For example, if you make a 20% down payment on a $250,000 mortgage toward the principal, the remaining principal amount would be $200,000.
Interest
Interest rates are based on a percentage and represent the amount of money you will pay in addition to your principal amount. Interest rates are considered a fee for borrowing the money, as they go back to the lender as profit. The percentage may remain the same throughout the life of the loan, but the amount you pay will gradually decrease as the principal amount decreases.
Taxes
Property taxes support your local community and pay for things like emergency services, infrastructure maintenance and public schools. Property tax amounts vary from one location to another and can also change from year to year. To find out how much your property taxes are every year, you can find the value of your home through a professional appraisal.
Insurance
Homeowners insurance is not always required by mortgage lenders, but proof of coverage is a common condition of your loan. Insurance rates vary both by location and provider.
Knowing your PITI means knowing how large of a mortgage you can afford. It also means having a more in-depth awareness of your financial situation, making it possible to find the best opportunities and homes in your price range. Remember these key terms and keep them in mind when considering mortgage options and your home search.
I have lived in the Athol-Orange-Phillipston area for most of my life. I graduated from the Athol-Royalston Schools and Boston College in 1973. I have been an active real estate Broker since 1973.. I have First hand knowledge of all the various aspects of working and living in our area.
For over 40 years I have maintained a presence in the real estate market through building new homes while buying and selling all types of real estate. I offer first hand knowledge and experience to Buyers and Sellers in our unique market area . I also have a keen interest in Waterfront properties, land and income properties. We are also currently focused on bringing new businesses into our area including Commercial , Mixed Use and Retail Development along the Rt 2 corridor including into the North Quabbin Business Park and the Greater Gardner to Athol-Orange areas.
I will to give you the benefit of my training and experience and the most personal service and attention that you deserve.
