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
Amie Lindwall-Belile
As your real estate professional, Amie has an extensive knowledge of the local real estate market to meet your needs. Born and raised in Fairfield County she understands the true value of this area. If your money’s involved, then the stakes are high. You can have confidence that Amie will get the job done. Licensed in 2004, she won her office’s Rookie of the Year award. Since then, she has been recognized as a multi-million dollar producer, an Honor Society member, Agent of the Month on numerous occasions and has received various other awards for her successes.
Having graduated from Southern Connecticut State University with a B.S. in Communications focusing on technology, she is able to provide her clients with the most comprehensive cutting edge services and tools. She is the co-founder of an organization close to her heart, The Dennis Lindwall Foundation, running annual events to raise money for pediatric cancer related causes. Over the years, the Dennis Lindwall Foundation has donated more than $100,000 to these charities.
Whether you are buying or selling a home in Fairfield County, you can rest assured that she will work very hard for you. With Amie, you will get the professional yet personalized care that you deserve. Take the first step into this exciting process, with Amie Lindwall-Belile.
