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Home Buyer's Recession Survival Guide - Can't Get A Mortgage? What A PITI!

Updated on May 26, 2009

There are two primary figures that are used to calculate how much mortgage you can reasonably afford and they are called Qualifying Ratios. They are a measure of how much of your monthly income is being committed to paying the mortgage. However, it's not just the mortgage payment itself, but all the costs associated with the loan: Payment, Interest, Taxes, Insurance. It's abbreviated PITI and some families really deserve pity when they realize just how much house they can't afford.

The FHA calls for no more than 29% of gross monthly income go towards the PITI. Conventional lenders have even lower limits. Let's do a little math and see just how far your income will or will not stretch.

What was once a jumbo loan is now a typical Mortgage. There are many areas in the country where a $250,000 mortgage is considered a starter. Let's use this as a basis for our calculations and let's use a higher interest rate to reflect that many people's credit standing has been ruined. In many cases, the payment for such a mortgage is close to $1,800 per month but that is far from the PITI amount, which is:

Loan Amount: $250,000
Rate: 7.75%
Term: 30 Years
Annual Homeowner's Insurance: $600
Annual Property Taxes: $2,500
Annual Mortgage Insurance: $1,800

Monthly Payments

Principal & Interest: $1,791.03
Property Taxes: $208.33
Homeowners Insurance: $50.00
Mortgage Insurance: $150.00
Total PITI Payment: $2,199.36

In order to qualify for that $2,200 a month in PITI, you will have to earn:

According to the FHA guidelines: $7,586

According to the more conservative conventional lenders: $8,800

There are not a whole lot of families who earn that much every month, even with double incomes. So what can be done? The choices are not exactly easy or overly palatable.

1) Move further out. The further away you get from a city center, the more likely the housing prices will drop. Property taxes and homeowner insurance rates are lower in rural areas too.

2) Make more money. There are a vast number of people who supplement their salaries by online auctions, providing local services, etc.

3) Downsize your expectations. It might be nice for each of the kids to have their own bedroom, but they might have to bunkbed for a while longer.

There is no really easy way to get around the PITI requirements, but since this is the age of telecommuting you might want to consider that in Portal, ND, there is a charming 3 bed, 2 bath, two storey home in very nice condition, hardwood floors throughout, on a 100 x 140 foot lot for sale for $24,900. No that's not the yearly PITI. That's the cash price for the entire property! $24,900 would barely buy you a parking space in Manhattan!

Read The Entire Survival Guide

Home Buyer's Recession Survival Guide - The Subprime Meltdown
Home Buyer's Recession Survival Guide - The Advantage Of Renting Over Buying
Home Buyer's Recession Survival Guide - Why Rent? Why Not?
Home Buyer's Recession Survival Guide - Five Common Mistakes House Buyers Make
Home Buyer's Recession Survival Guide - Get Your Home Sold Quickly & At Your Asking Price
Home Buyer's Recession Survival Guide - Improve Your Home's Value And Sell It For More!
Home Buyer's Recession Survival Guide - Learn The Value Of Curb Appeal
Home Buyer's Recession Survival Guide - Home Staging: Valid Selling Technique Or Fraud?
Home Buyer's Recession Survival Guide - Before You Go House Shopping
Home Buyer's Recession Survival Guide - The Home Condition Checklist
Home Buyer's Recession Survival Guide - Getting A Mortgage From Different Types Of Lenders
Home Buyer's Recession Survival Guide - What To Do After You're Turned Down
Home Buyer's Recession Survival Guide - New Initiatives To Help Get You Approved
Home Buyer's Recession Survival Guide - Isn't HUD An Old Paul Newman Movie?
Home Buyer's Recession Survival Guide - Jumbo Isn't As Huge As He Once Was
Home Buyer's Recession Survival Guide - FHA Q&A
Home Buyer's Recession Survival Guide - The FHA's Credit Requirements Vs. The Bank's
Home Buyer's Recession Survival Guide - Your Credit Score And Your Mortgage
Home Buyer's Recession Survival Guide - Credit Score Confusion
Home Buyer's Recession Survival Guide - Keeping That Credit Score Nice & High
Home Buyer's Recession Survival Guide - Minimize The Interest Payable
Home Buyer's Recession Survival Guide - What Is PMI & Why Do I Care?
Home Buyer's Recession Survival Guide - The LIBOR-COFI-COSI Alphabet Soup
Home Buyer's Recession Survival Guide - REO: Get Rich Quick Or Just Waste Time?
Home Buyer's Recession Survival Guide - Obtaining Flipping Money
Home Buyer's Recession Survival Guide - Consider The Additional Costs
Home Buyer's Recession Survival Guide - What Is Escrow?
Home Buyer's Recession Survival Guide - Tips To Avoid Foreclosure
Home Buyer's Recession Survival Guide - The Changing Value Of Your Mortgage Dollar
Home Buyer's Recession Survival Guide - How To Ride The Interest Rate Spikes
Home Buyer's Recession Survival Guide - Can't Get A Mortgage? What A PITI!
Home Buyer's Recession Survival Guide - Calculating Your Closing Costs
Home Buyer's Recession Survival Guide - Mortgage Broker or Mortgage Banker?
Home Buyer's Recession Survival Guide - The Magic Of A Down Payment
Home Buyer's Recession Survival Guide - A Refinance Checklist
Home Buyer's Recession Survival Guide - Refinancing With Bad Credit
Home Buyer's Recession Survival Guide - The Self-Employed Mortgage Maze
Home Buyer's Recession Survival Guide - VA Loans
Home Buyer's Recession Survival Guide - Offset & Reverse Mortgages
Home Buyer's Recession Survival Guide - The Reasons To Not Buy An Offshore Retirement House
Home Buyer's Recession Survival Guide - How To Pay Less Than $500 A Month
Home Buyer's Recession Survival Guide - Five Easy And Cheap Tips To Save Big $ On Energy

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