PITI Mortgage Calculator User Guide

31. Oct, 2011 0 Comments

Hello there! If you are new here, you might want to subscribe to the RSS feed for updates on this topic.

PITI Mortgage Calculator users consider it to be the most precious tool in their homebuyer toolkit. The acronym is short for principal, interest, property tax and homeowners insurance. It works for figuring out amortization schedules for both Federal Housing Administration and conventional fixed rate loans.

Homebuyers looking to use this tool will need to know the interest rate, term and loan amount. They will also need to find out the annual or monthly payments for property tax and homeowners insurance. Once these figures are fed in, the tool is able to generate an amortization schedule.

If not for this tool, homebuyers would be struggling with complex math involving things like factors. That’s the amount the homeowner would have to pay for every $1000 of the loan. This figure is calculated taking into consideration the proposals’ interest rate and term.

Let’s consider a specific example to show how difficult it can get when doing it manually sans a mortgage calculator with PITI. Assume the loan amount is $250,000 and the homebuyer is looking at a 5% interest rate proposal with a term of 15 or 30 years. The calculations start by referring to a factor chart, which shows that the factor for this proposal can be either 5.37 or 7.91 for 30 & 15 year terms, respectively.

The homebuyer then has to multiply this factor by 250 (since it is a $250,000 proposal), which provides a per $1000 loan amount payment of either $1977.50 or $1342.50 (for a term of 15 or 30 years, respectively). For those who have no inclination for these calculations, the best solution is to simply use the home loan calculator with taxes and insurance figures as input, plus of course the amount, interest and term.

One other thing to note is that this tool works for FHA loans too, so homebuyers are advised to do a comparison of FHA vs conventional proposals. The point here is that FHA provides insurance so the lender carries less risk and offers better terms. Homebuyers without good enough credit can qualify for proposals that they couldn’t normally get without the FHA’s backing.

Possibly Related Posts: