Your Monthly Mortgage Payment

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When you own a home, the responsibility goes deeper than just making monthly principal + interest payments to the bank. Real estate taxes and homeowners insurance are due, too.

Principal and interest payments are typically due monthly to your lender; real estate taxes are due to your local taxing authority; and homeowners insurance is due to your insurer.

Depending on how you manage these four parts, you may get a lower rate.

What Is PITI?
When a mortgage lender is trying to determine your ability to repay, one area at which it looks is your total monthly housing payment.

Your total monthly housing is calculated as follows:
•Your monthly mortgage principal payment
•Your monthly mortgage interest payment
•Your annual real estate tax bill, pro-rated to a monthly figure
•Your annual homeowners insurance bill, pro-rated to a monthly figure

Collectively, these elements — principal, interest, taxes, insurance — are known as PITI.
PITI can vary from day-to-day, and from home-to-home. This is because mortgage rates change daily, which change a home’s principal + interest payment, and because every home’s tax bill and insurance bill are different.

Many mortgage programs such as the FHA Streamline Refinance and various VA home loans require monthly pro-rated tax and insurance bills to be included within the monthly mortgage payment, a loan trait known as “escrowing” taxes and insurance.

Find Your Monthly Escrow Payment
Escrows are a part of your mortgage payment and you’ll want to know your obligation. It’s best to use a calculator because, although the math is simple, you want to make sure you get it right.

First, find your home’s real estate tax bill(s), noting that in some areas, you may receive statements from multiple different taxing authorities. Find the sum of these statements and add to it your annual hazard insurance premium.

If you are a home buyer and don’t know what your hazard insurance premium will be, estimate 1% of the purchase price. This will yield an estimate which is likely larger than your actual premium, but when building a budget, it’s often better to estimate on the high-side.
Next, divide your sum by the 12 months in a year.

These monies are paid along with the mortgage payment’s principal + interest portion.

Call your favorite Go To Guys for any questions regarding your payment or escrow! 770.924.1111

Comments

  1. It is interesting to learn that the PITI is the best way to understand mortgage payments. Having organization is the number one most crucial element of any financial plan. Being able to separate PITI parts to break them down is the best way to set up mortgage payments.

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