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Question Completion:
They have found a very nice townhouse available for $200,000. Assuming a 20% down payment and a 30-year fixed rate mortgage at 6.65%, what will their PITI be? Annual property taxes are $2,400 and homeowner's insurance premium is $900 per year.
Answer:
Hector and Maria Gonzales
Their PITI will be:
Mortgage Payment $1,027.14
Property Tax $200.00
Home Insurance $75.00
Total PITI = $1,302,14
NB: The rule states that Hector and Maria's PITI should not exceed 28% of their pre-tax monthly income.
Explanation:
a) Data and Calculations:
Home Price = $200000
Down Payment = 20
%
Loan Term = 30 years
Interest Rate = 6.65
%
Start Date = Jan 1, 2020
Annual Tax & Other Cost
s
Property Taxes = $2400
Home Insurance = $900
PMI Insurance = $0
HOA Fee = $0
Other Costs = $35400
b) Based on an online financial calculator:
Monthly Pay: $1,027.14
Monthly Total
Mortgage Payment $1,027.14 $369,771.77
Property Tax $200.00 $72,000.00
Home Insurance $75.00 $27,000.00
Other Costs $2,950.00 $1,062,000.00
Total Out-of-Pocket 4,252.14 $1,530,771.77
House Price $200,000.00
Loan Amount $160,000.00
Down Payment $40,000.00
Total of 360 Mortgage Payments $369,771.77
Total Interest $209,771.77
Mortgage Payoff Date Jan. 2050
c) The PITI is an acronym for principal, interest, taxes, and insurance—the sum components of a mortgage payment. It helps Hector and Maria Gonzales to determine the affordability of this mortgage. The Other Costs of $35,400 represent the annual costs of student and car loans, credit cards payments, and the condo, where they live.