PITI is an acronym for principal, interest, taxes and insurance. In real estate, it's used by lenders to estimate your qualifications for a mortgage. One of the key variables in the formula is property taxes, which vary by location and individual home. But how do property taxes affect your PITI ratio? Here is a basic explanation to help:
Property taxes are calculated based on several variables. One of the variables is the value of your home, which can be more complicated than just the purchase price. A home's assessed value is the value decided by tax assessors and can be adjusted as often as once per year. Fair market value, however, is much more fluid and depends on the value of surrounding homes, the local economy and more.
In addition to home value, property taxes are determined by a local tax rate. You can find out your tax rate from your local tax assessor or municipality records online. Other factors like appraisal value can also affect your property taxes, especially if your professional appraisal is much higher or lower than the assessed amount.
Property taxes matter to lenders because they make up part of your PITI. This combination of numbers can help lenders determine your eligibility for a mortgage because it represents a large portion of your overall financial situation. Your property taxes combined with other expenses and your debt-to-income ratio allow lenders to determine how much money you can afford to borrow without risk to them.
Knowing your PITI can help you make more informed financial decisions when buying or refinancing a home. If you're interested in learning more, consulting a lender or tax professional is a great way to begin.
An enthusiastic polo player, aviatrix and fourth generation member of one of the oldest winery families in the Napa Valley, Roberta has lived in the Bay Area her entire life. She has over thirty years of experience in buying, selling and managing real estate in the residential, investment and commercial markets. Not content to just “get the job done”, she wants to exceed your expectations. Roberta believes in service with commitment. Utilizing the kind of knowledge that is obtained only through extensive life experience and an in-depth understanding of the area and local market, she works with you to provide maximum results. During her accomplished career, Roberta has refined important skills in communication, negotiation, attention to detail and sound business practices, all of which are vital to the success of her clients today. Please call Roberta directly at 707.339.0233 to discuss your real estate needs.