PITI Mortgage Calculator For Homebuyers

By Kelly Turner

PITI Mortgage Calculator usage doesn't just save time, but is practically essential for a homebuyer. The abbreviation stands for principal/interest/tax/insurance (property tax & homeowners insurance). It can be used for calculating the amortization schedule for either a Federal Housing Administration loan or a conventional fixed rate loan.

Homebuyers looking to use this tool will need to know the interest rate, term and loan amount. They will also need to find out the annual or monthly payments for property tax and homeowners insurance. Once these figures are fed in, the tool is able to generate an amortization schedule.

Had it not been for the use of this tool, getting the amortization schedule would involve a lot of math where the 'Factor' for the proposal is involved. Factors are a method for finding the amount the homebuyer would need to pay per $1000 in loan amount. The Factor will vary depending on the interest rate and term period.

Here's an illustration that shows how it works when the homebuyer is not using a mortgage calculator with PITI. Let's say the homebuyer wants a $250k loan and is willing to pay a 5% interest rate on it, for a term of either 15 or 30 years. In order to find the amortization schedule for each term, the homebuyer needs to start by opening up a factor chart to find that the factor for a 15 year loan at a 5% interest rate is 7.91 and for a 30 year loan it is 5.37.

So for the 15 year term, the proposal involves a payment of $1977.50 (250 times 7.91) for every $1000 in the $250k loan amount. For a 30 year term, it would be $1342.50 (250 times 5.37). Assuming that no body really wants to go around doing these calculations, it's a whole lot easier to just use a home loan calculator with taxes and insurance data fed into it along with the proposal's basic details.

One other thing to note is that this tool works for FHA loans too, so homebuyers are advised to do a comparison of FHA vs conventional proposals. The point here is that FHA provides insurance so the lender carries less risk and offers better terms. Homebuyers without good enough credit can qualify for proposals that they couldn't normally get without the FHA's backing.

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