Be sure to ask your lender for your PITI to have a good grasp of what you’ll be required to pay every month. When you ask for a Loan Estimate from your lender, you’ll be able to see your projected monthly payment, but that may not include every line item in your PITI.
These fees can be several hundred dollars per month, so you’ll want to keep that in mind when searching for homes and assessing your budget.
Some properties, especially condos, may also require homeowners association fees (HOA fees). Insurance: This includes homeowners insurance and title insurance (two types of insurances needed to close on your home), and could also include mortgage and flood insurance, depending on your location and financing. Tax rates can be quite high in certain areas, so it’s a good idea to research rates in advance as they can add significantly to your monthly payment. Taxes: Property or real estate taxes are determined locally, and vary from area to area. Interest: This is money going toward paying interest on your loan. Principal: This is money going toward the actual balance of your loan. This is commonly referred to as your PITI. It consists of your principal, interest, taxes, and insurance. Your monthly mortgage payment is more than what you owe your lender. One of the best ways to understand how much you can truly afford is to compare your potential monthly mortgage payment to your monthly budget. If you love travel, fine dining, spoiling your children (or cats), then you’ll need to factor that into your affordability. However, pre-approval is based on what your finances allow, and it doesn’t necessarily take into account how much your lifestyle will allow.
Getting pre-approved for a mortgage is a great step in understanding how much home you can afford. Your monthly payments include insurance, taxes, fees, and moreīudgeting and practicing payments will set you up for success Borrowers are often pre-approved for more than they can afford
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