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 & your home's value
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.
Why taxes matter to lenders
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.
About the Author
Janie Schriewer
Welcome to the Janie Schriewer & Associates at RE/MAX Results. Janie just wrapped up her 30th year in the business & over that time has been adapting to the always-evolving Real Estate industry. In recent years she has added 2 members: Her Son Derek—Licensed Buyer & Technology Specialist, and Buyers' associate Melissa Kelley. We are all full-service REALTORS who can assist with selling your home and/or finding you your next home. The added professionals mean potential Clients have more convenience for showings & direct communication with Franklin County areas real estate Leaders.
Communication is crucial in Real Estate & Janie leads by example for our team as she prides herself on availability to her clients. Whether you prefer texting, phone calls, emails, or instant messaging, Janie Schriewer & Associates can accommodate. Whenever you want to talk to us or work with a REALTOR, the Schriewer’s have the experience & care to offer the right advice for your situation. We know the intricacies of negotiating a deal from the original offer to the signatures at closing as well as alleviating all of the hurdles that may arise in between. We treat you just like family. We care about you and what is best for you. Call Us today. Thank you as always for friends, past clients and customers we love referrals. Talk to you soon.