Remember your P's and I's

Buying a new house is an exciting process.  You might hop online to one of those free slick mortgage calculators to see how much your mortgage and principal payment will be for that dream home you just saw this weekend.  In the height of all that fun don't forget to include P.I.T.I. in your calculations and thought process.


In banking jargon, P.I.T.I. stands for principal, interest, taxes, and insurance.  It's those last two that can surprise you - taxes, and insurance.  And that surprise can raise your monthly payment significantly so it's good to think about them in advance.


Lenders typically set up an escrow account to collect for taxes and insurance on a monthly basis, so when the bill comes in it will be paid automatically.  It's easy to check your county web site to look up property tax which can frequently be several thousand dollars.  


The insurance we're talking about here isn't homeowners, its private mortgage insurance or PMI.  If your down payment doesn't get you to 20% equity in the house it's a given the lender will require you to add PMI insurance to your monthly payment.


If you're aware and planning for it these are not scary numbers.  It's just good to take as many surprises out of the home buying process as possible, so when you're doing your calculations, remember your P's and I's!