Question 1

What is PITI and why does it matter for monthly budgeting?

Accepted Answer

PITI represents the four pillars of housing costs: Principal, Interest, Taxes, and Insurance. While principal and interest repay the loan, lenders typically collect property taxes and homeowners insurance in an escrow account, ensuring these critical bills are paid on time.

Question 2

How does putting 20% down avoid Private Mortgage Insurance (PMI)?

Accepted Answer

When your Loan-to-Value (LTV) ratio is 80% or less, conventional lenders do not require PMI. Under the federal Homeowners Protection Act of 1998, borrowers can request PMI cancellation once loan balance reaches 80% of original value, and lenders must automatically cancel it at 78% LTV.

Question 3

What is the financial tradeoff between a 15-year and 30-year mortgage?

Accepted Answer

A 15-year fixed mortgage offers lower interest rates and amortizes twice as quickly, saving tens or hundreds of thousands of dollars in total interest. A 30-year mortgage features lower mandatory monthly payments, providing greater monthly cash flow flexibility.

Question 4

How do property taxes and HOA dues impact borrowing capacity?

Accepted Answer

Lenders evaluate your total Debt-to-Income (DTI) ratio (typically capped around 36% to 43%). High local property taxes and mandatory HOA dues increase your monthly obligations dollar-for-dollar, which lowers the maximum loan amount for which you can qualify.

Question 5

How do extra principal payments shorten the loan amortization period?

Accepted Answer

Because early monthly payments consist predominantly of interest charges, making additional principal payments directly reduces the remaining loan balance, substantially accelerating equity accumulation and eliminating years of future compound interest charges.

Mortgage Calculator

Frequently Asked Questions

Finance · Related Calculators & Tools