PITI? What's That?
Whenever you are involved in the buying or selling of real property, whether on the buying or selling side, there are many terms and definitions that you should know. There are lots of these special terms and it doesn't seem feasible for the average real estate buyer or seller to learn them all. You might include that as one of the reasons why it's good advice to get a real estate agent working for you, although admittedly it might not be at the top of the list. There are still some terms that you should know -- whether you have a real estate agent working for you or not -- and one of them is the frequently-used term from the world of mortgages and lending, PITI. Here is an explanation of the term and what each of the letters stands for.
P Is for Principal
The principal is the total base amount that you are borrowing from the lender to buy the home. This figure varies from one scenario to another depending on how much you put down on the home and how much you actually borrow. The principal is usually the largest part of the PITI total.
I Is for Interest
Whenever you borrow or pay over a period of time, you pay an interest charge. This is the amount the lender gets from you as the fee for loaning you the amount needed, based on the cost of keeping money from doing other work. It's calculated in percentages. Based on the terms you have, the interest rate can either remain fixed for the entire term of the loan or it can be variable, meaning it is changed by indices reflecting the market and other factors.
T Is for Taxes
Even when you are buying a home, you can't get away from paying taxes to Uncle Sam and all of his relatives. Taxes on real estate go to government jurisdictions at the local level like the city or county, for the purpose of paying for public services. The tax revenues from homeowners help neighborhood schools, medical facilities, senior centers and other local facilities serve local residents. The taxes are typically added into your monthly mortgage payment and are prorated each month. The lender pays the tax on your behalf to the appropriate taxing authority.
The Second I Is for Insurance
You wouldn't want to have a home without having sufficient insurance, and if you are buying it with borrowed money the lender will insist that you are properly insured. Your home is your biggest investment and a homeowners insurance policy is vital for your family's well-being. There are many kinds of policies that you can decide on, which will be the topic of a different article. The options that are available to you also depend on how much you put down on the home. If you put down of less than 20 percent, lenders will require that you carry a certain policy that covers them so they will get their money if the home is destroyed or if you the home is lost in a foreclosure. These payments are generally put in with your monthly mortgage payment as well.
This article was made available by Automated Homefinder, Colorado's Boulder Real Estate professionals.
54-624 Oak Tree
La Quinta, CA 92253
Office: (888) 518-2078 Toll-Free
Fax: (760) 771-1950
Email: info@laquintarealestate.com
