Question 1

What is PITI?

Accepted Answer

PITI stands for Principal, Interest, Taxes, and Insurance. It represents the total monthly cost of homeownership, including your mortgage payment plus property taxes and insurance.

Question 2

How is my monthly mortgage payment calculated?

Accepted Answer

Your monthly payment is calculated using the formula: M = P × r × (1+r)^n / ((1+r)^n - 1), where M is monthly payment, P is principal, r is monthly interest rate, and n is total payments.

Question 3

What is PMI and when do I need it?

Accepted Answer

PMI (Private Mortgage Insurance) protects the lender if you default on your loan. It is typically required when your down payment is less than 20% of the home price. PMI can usually be removed once you have 20% equity.

Question 4

How does down payment affect my mortgage?

Accepted Answer

A larger down payment reduces your loan amount, which lowers your monthly payment and total interest. If you put down less than 20%, you will likely need to pay PMI, which increases your monthly cost.

Question 5

What is the difference between APR and interest rate?

Accepted Answer

The interest rate is the cost of borrowing the principal. APR includes the interest rate plus other costs like lender fees and PMI, giving you the true annual cost of the loan.

Question 6

How can I lower my monthly mortgage payment?

Accepted Answer

You can lower your payment by making a larger down payment, choosing a longer loan term, finding a lower interest rate, or reducing property taxes and insurance costs.