Randall Martin

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What a...PITI

October 22nd, 2009

So you've decided to buy a house, but you're not sure how much you can afford. 

How much will my monthly payments be???

Maybe you saw a commercial on TV talking about a company offering a $120,000 home loan for $650 per month!!!  YEAH!!! 

But wait!  This is only HALF of the truth...

There's a good rule of thumb to follow in the Houston area...most of the time your TOTAL monthly payment will be around 1% of the sales price of the home.

OK.  Let me explain.  When you want to figure up your monthly payment for a home, remember PITI.

P - Principal
I  - Interest
T - Taxes
I - Insurance

These are the four factors that will determine your total monthly payment for a home.  Principal and Interest are part of the loan itself.  For Taxes, take the total estimated tax figure for the year and divide it by 12 to get the cost per month.  For Insurance, get a quote from a local agent and divide that yearly number by 12.  Once you get these 4 numbers, add them together to get a good estimate of what your TOTAL monthly payment will be.  More than likely, your $120,000 house will cost you somewhere around $1,200 per month.

Don't be confused going into the buying process.  Know what you are prepared to spend before you make any rash decisions.  Consult a REALTOR, like myself, for help and guidance with your home purchase.  Remember...

"Knowing is half the battle."  -G.I. Joe

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Disclaimer : The views and opinions expressed in this blog are those of the author and do not necessarily reflect the official policy or position of the Houston Association of REALTORS®

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