5 Tax Mistakes New Homeowners Make » Mortgage Masters Group

Many mortgage payments are made up of four parts, called PITI. PITI is an acronym that stands for principal, interest, tax, and insurance. It’s important to understand PITI because it is the real number you need to use in order to find out how much mortgage you can afford to pay each month.

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 · Traditionally, lenders have used the debt-to-income (DTI) ratio to estimate how much a homeowner can afford to borrow. This ratio is computed by comparing your expenses to your gross (pre-tax) income. The lower the number, the better. If you make $3,000 a month before taxes, and you pay $300 toward debt, your debt-to-income ratio is 10%.

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