Question 1

What does PITI stand for?

Accepted Answer

PITI is Principal, Interest, Taxes, and Insurance — the four components of a typical monthly mortgage payment. Principal reduces your loan balance, interest is the lender's fee, property taxes are paid into escrow and remitted to your local government, and homeowners insurance protects against property damage. Lenders use PITI to calculate your debt-to-income ratio.

Question 2

How much house can I afford?

Accepted Answer

The 28/36 rule is the standard guideline: your monthly housing costs (PITI) should not exceed 28% of gross monthly income, and total debt payments shouldn't exceed 36%. On a $80,000 salary, that's $1,867/month for housing. However, lenders may approve up to 43–50% DTI in some cases. Focus on what's comfortable for your lifestyle, not the maximum you can qualify for.

Question 3

When does PMI go away?

Accepted Answer

PMI (Private Mortgage Insurance) is required when your down payment is less than 20%. Under federal law (Homeowners Protection Act), PMI must be automatically cancelled when your loan balance reaches 80% of the original appraised value. You can request cancellation earlier if your home has appreciated and a new appraisal confirms 20% equity. PMI typically costs 0.5–1.5% of the loan amount annually.

Question 4

Is a 15-year or 30-year mortgage better?

Accepted Answer

15-year mortgages save a significant amount of interest (often $100,000–$200,000 on a $300,000 loan) and build equity faster. But monthly payments are 35–50% higher. 30-year mortgages offer lower required payments and flexibility — you can make extra payments to pay down principal when cash flow allows, while keeping the lower minimum payment as a safety net. Most financial advisors recommend 30-year mortgages for the payment flexibility.

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