Every industry has its own lingo and anachronism. None more than the government, but that is a discussion for another day. Let's discuss one for the mortgage industry.

PITI: Principal, Interest, Taxes and Insurance. Wouldn't payment be simpler? But you would be surprised how many, especially first time home buyers, don't include property taxes and homeowners insurance in their payment calculations. They go online plug into a mortgage loan calculator and viola; they go cruising around looking for real estate.

A real estate agent shows them property in the chosen price range without verifying they have actually engaged in a mortgage consultation and the home buyer gets excited and wants to make an offer. Tell me you don't do that, please tell me.

By the way, I heard this week there are some lenders on the internet allow the homebuyer to input information and print their own prequalification letter without even talking to a home loan consultant or having a credit report pulled. Do you think they need a second opinion?

Once the taxes and insurance get tacked on all of a sudden the payment is out of their comfort zone, much less can they qualify. The result is a disillusioned prospect. No Sale!

I don't want to escrow; yeah well that's great what are your taxes and insurance going to be because we are using it for qualifying PITI.

The PITI is how your front end debt to income ratio is calculated. The back end ratio calculates your PITI and your other recurring debt payments. Debt to income ratios you ask? More lingo and fodder for another blog.

If you fall under FNMA's or FHA's buy and bail provisions PITI for both properties are utilized in the debt to income ratio computations.

The PITI is also used to figure reserve requirements. Reserves? Look forward to another post coming soon.

Wait a minute, what about Home Owners Association fees? That is included too. Doesn't that make it PITIH? It becomes pitiful when the homebuyer is maxed out with PITI and then we have to add the HOA.

Helping you serve more customers, save time and make more money

Jay Williams

www.myhomeloanwithjay.com