1. What is PITI Ratio?

The PITI ratio is a key metric used by lenders to evaluate a borrower's ability to manage monthly mortgage payments. PITI stands for Principal, Interest, Taxes, and Insurance - the four components of a typical mortgage payment.

2. How Does the Calculator Work?

The calculator uses the PITI ratio formula:

Where:

• \( \text{PITI} \) — Total monthly mortgage payment including principal, interest, taxes, and insurance ($)
• \( \text{Gross Income} \) — Total monthly gross income before deductions ($)

Explanation: The ratio expresses the percentage of gross income that goes toward mortgage payments, helping lenders assess affordability.

3. Importance of PITI Ratio

Details: Lenders typically prefer PITI ratios below 28% for conventional loans. Higher ratios may indicate higher risk for the lender and potential financial strain for the borrower.

4. Using the Calculator

Tips: Enter your total monthly PITI payment and gross monthly income in dollars. Both values must be positive numbers to calculate the ratio.

5. Frequently Asked Questions (FAQ)

Q1: What is considered a good PITI ratio?
A: Most lenders prefer a PITI ratio of 28% or less, though some programs may allow up to 36% depending on other factors.

Q2: Does PITI include HOA fees?
A: Typically no, PITI only includes principal, interest, taxes, and insurance. HOA fees are usually considered separately in debt-to-income calculations.

Q3: How does PITI ratio affect mortgage approval?
A: A lower PITI ratio generally improves mortgage approval chances as it indicates better ability to handle monthly payments.

Q4: Should I use gross or net income for PITI ratio?
A: Lenders use gross income (before taxes and deductions) when calculating PITI ratios for mortgage qualification.

Q5: Can PITI ratio change over time?
A: Yes, PITI ratio can change if property taxes or insurance premiums increase, or if your income changes significantly.