The Effect Real Estate Taxes and Insurance have on Mortgage Loan Approvals and Monthly Mortgage Payments

By
Mortgage and Lending with NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 IL Lic 031.0006220/WI

 

The Effect Real Estate Taxes and Insurance have on
Mortgage Loan Approvals and Monthly Mortgage Payments
 
 
     There is an acronym in the Mortgage Loan Industry known as PITI.  This stands for:
  • Principal
  • Interest
  • Taxes
  • Insurance(s)   (Insurance for Homeowners Premium and Monthly Mortgage Insurance must be calculated and included in an Estimated Housing Payment.  Mortgage Insurance is required if a Down Payment is less than 20%).

     If buying a property within a Homeowners Association, you can add an "A" to the end of that list/word, so it becomes PITIA.
https://1609956119.secure-loancenter.com/FreeConsult.aspx 
     PITI/PITIA is the actual total housing payment that is arrived at when a Loan Officer is "pre-approving" a Home Buyer.  

     As Mortgage Lenders, we tend to focus mostly on the Sales Price or Loan Amount for Home Buyers' Pre-Approvals.  But I'm ultimately trying to pin down the Maximum Payment of PITI/PITIA.  This payment is then compared to the Home Buyer's gross monthly income for what's called the Housing Ratio ... or Front-End Ratio.  

     To arrive at the Total Debt Ratio, or Back-End Ratio (ideally 43% in this day and age), I add the Mortgage Payment (PITI/PITIA) to the other monthly debt my Borrowers have ... that debt coming from Auto Loans, Student Loans, Installment Payments, Credit Card Payments, Child Support (if applicable) that my Borrower may have.

     So what is the significance of this seemingly straight-forward lending exercise??

     I want to illustrate how important it is to know if the piece of property my Borrower is considering for purchase lies within a Homeowners Association ... and if it does, what the corresponding Association Duesare.

http://www.genemundt.com/ContactUs.aspx     Knowing the last available Real Estate Tax Bill is also important for a Mortgage Lender and Borrower.  That bill is needed in order to calculate a Monthly PaymentIf Mortgage Insurance is needed, there are various factors that impact and figure into the cost of that Insurance (i.e., Credit Scores, Down Payment Percentage, Owner-occupied VS Investor, etc.).  

     And lastly, the Principal and Interest (P&I) Payment is calculated based on the appropriate combination of Loan Amount and Interest Rate.  Add the Estimate for monthly Homeowners Insurance ... and I get a reliable PITI/PITIA.

     Without a "reliable" and accurate PITI/PITIA, I'd be gambling with your Approval in Underwriting, especially when you're approaching the Maximum Allowable Debt-to-Income Ratio (DTI).  Debt-to-Income Ratios are best kept at 43% to 45% (or less), for your optimum chance of receiving Loan Approval. 

     The Effect Real Estate Taxes and Insurance have on  Mortgage Loan Approvals and Monthly Mortgage Payments.  Home Buyers need an accurate calculation of their total Monthly Mortgage Payment in order to make sound decisions surrounding their Mortgage financing and home purchase.  It may seem like I'm asking a lot of questions when we're in the Pre-Qualifying stage of your Mortgage Process.  But as you can see from above, the success of your Approval depends on me asking them. 
 
 
     *  Hoping to Buy, Refinance, or Construct a Home within a Lincoln-Way Community (Manhattan, New Lenox, Mokena, Frankfort), Will County, or elsewhere in ChicagolandContact me today!  I'll put my 36 years of Mortgage experience and expertise hard to work on your behalf.
     I can be easily found at:
Direct:  815.524.2280
Cell or Text:  708.921.6331
eFax:  815.524.2281
 
Click HERE for a FREE Mortgage Consultation!
Ready to Apply for your Mortgage?
https://1609956119.secure-loancenter.com/WebApp/FullAppLogin.aspx

 

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Gene Mundt

 Mortgage Originator  -  NMLS #216987    

                                 IL Lic. #031.0006220  -  WI License #216987                                                                                                    

NMLS #175656

 

Gene Mundt, Mortgage Originator,  40+ years of #mortgage experience, will offer you exemplary mortgage service and advice when seeking:  #Conventional, #FHA, #VA, #Jumbo, #USDA, and Portfolio Loans in #Chicago and the greater Chicagoland region, including:  The #Lincoln-Way Area, #Will County, (#New Lenox, #Frankfort, #Mokena, #Manhattan, #Joliet, #Shorewood, #Crest Hill, #Plainfield, #Bolingbrook, #Romeoville, #Naperville, #Wilmington, #Peotone, etc.), #DuPage County, the City of Chicago, #Cook County, and elsewhere within IL and Wisconsin. 

 

Your Referrals & Testimonials are Always Greatly Appreciated! 

 

 

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Topic:
Home Buying
Location:
Illinois Will County Joliet
Groups:
Realtors®
Mortgages
Chicago Area Real Estate BUZZ!
1st Time Buyers
Bananatude
Tags:
mortgages
buying a home
escrow
real estate taxes
piti
calculating mortgage payments
pitia
mortgage ins
homeowners assoc

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Ambassador
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John Meussner
Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, - Walnut Creek, CA
#MortgageMadeEasy Walnut Creek, CA 484-680-4852

Great info, Gene.  The entire PITI(A) is important to consider.  I work with a lot of folks looking for homes in the PA, DE, NJ tri-state area and always advise them to pay attention to property taxes as they can drastically effect payment differently across the states.

Jan 29, 2014 07:11 AM #1
Rainmaker
1,234,213
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Great info and share, John .. you prove the point perfectly!  Location location location takes on a whole new meaning when considered in this context ...

Gene

Jan 29, 2014 07:39 AM #2
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Noah Seidenberg
Coldwell Banker - Evanston, IL
Chicagoland and Suburbs (800) 858-7917

Yep Gene good old PITI. I always get a lot of first time buyers and they ask me "just how much a month is this gonna cost" like I am a great mortgage guy like Gene Mundt I always try to give them round and fairly close estimates from a mortgage calculator I have on a few sites but no one know better then you guys.

Jan 29, 2014 08:05 AM #3
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Gene with the QM Rules reducing the Total Debt-To-Income Ratio from 45% to 43% the taxes, PMI, and Home owner insurance is having even more of an impact.  Amazing how quickly you can hit the 43%

Jan 29, 2014 08:08 AM #4
Rainmaker
570,170
Christine Smith
Buyers Brokers Only LLC - www.BuyersBrokersOnly.com - Canton, MA
Exclusive Buyer Agent & Attorney, Canton, MA

Gene...this is so important!  One of my local towns has a significantly higher tax rate than the others.  For some buyers, the tax rate has changed the price they could afford in that town.  When buyers are considering various towns, I always remind them to look at the taxes to make sure it's in line with what they were approved to pay as their monthly payment.

Jan 29, 2014 09:32 AM #5
Rainmaker
2,265,996
Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

Good morning Gene. So far I have not seen any QM effect on getting any of my loans approved. All of our lenders are accepting the findings even though a transaction has ratios above 43%.

Jan 29, 2014 06:16 PM #6
Rainmaker
4,797,386
Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

Gene, excellent information.  And here in FL, the insurance can be a real eye opener, especially for older homes.

Jan 29, 2014 08:59 PM #7
Rainmaker
1,234,213
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Noah:  Appreciate your kind words .. and the fact that you promote the idea of talking to a Lender.  Great advice ...

True, George ... exactly why it's so important to talk to a Lender in advance of actually wanting to start a home search.  With a little time and guidance, we can increase the chances of success ...

Excellent advice, Christine ... and also good info for agents to have when suggesting properties to view.  As you state, it can make a huge impact and difference!

Joe:  You speak of something I think our industry has done a very poor job at relating to the public.  I think with time, the public will come to understand this fact.  Of course, our industry could do a much better job at getting the word out ...

Gabe:  The real professionals are aware of this and take that into consideration when suggesting homes for viewing.  Insurance costs can make a real difference and they are educated regarding that fact ...

Gene

Jan 30, 2014 12:44 AM #8
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Sad, sad. 
The cost of home owners' insurance goes up. 
The cost of real estate taxes goes up.

So the owners move farther out from their jobs.

Then the cost of gasoline goes up.

All the while the financing limits goes down.

What's that old saying?  "We just can't get a break."

 

Jan 30, 2014 05:53 AM #9
Rainmaker
1,234,213
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

True, Lenn ... so we try our best to find the "deal" and best programs and rate we can to even the playing field out as best as possible ...  

Gene

Jan 30, 2014 06:09 AM #10
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Bob Crane
Woodland Management Service / Woodland Real Estate, Keller Williams Fox Cities - Stevens Point, WI
Forestland Experts! 715-204-9671

Great info Gene, so important to consider all of the factors leading to success in this important part of the sale.

Jan 30, 2014 09:27 AM #11
Rainmaker
1,234,213
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Thanks, Bob.  Best to be completely aware and prepared prior to making decisions ...

Gene

Jan 31, 2014 03:10 AM #12
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Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi

708.921.6331 - 40+ yrs experience
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