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The Golden Percentage
BORROW WHAT YOU NEED. HAVE ENOUGH LEFT TO ENJOY LIFE.
What is the golden percentage you ask? Well before we answer that, we must first begin to understand PITI. PITI stands for Principal, Interest, Taxes, and Insurance (PITI). PITI are the main components of your monthly mortgage payment that encompass everything from the principal amount (what you borrowed from the lender), the interest (the charge that the lender is charging you to borrow the principal), property tax, and insurance, including home owner’s insurance and private mortgage insurance (insurance that your lender charges if you fall below a specific loan-to-value (LTV) ratio.
Most lenders prefer that borrowers have a monthly PITI payment that is equal to or less than 28% of your gross monthly income. For example, if you earn $4,000 per month in gross income, than your monthly PITI should be equal to or less than $1,120 per month. This is a critical component of the real estate game. You must understand that not just what you buy, but when you buy and how much of it, determine how successful you will be in the process.
Thus, it is integrally important when working with a agent to fully understand what it is that you can comfortably afford and then, just as importantly, speak with a qualified lending professional who can show you what you are prequalified to afford monthly. And remember, just because you can prequalify for a certain dollar amount, does not necessarily mean that you want to borrow that full amount. Start with the end in mind, figure out what you want to pay each month and use the golden percentage of 28% to help you get there.
If you are looking to find out more about home loans in Flathead, then please reach out. We can connect you with some lender professionals and get your home search started out on the right foot…pre-qualified to buy! We definitely recommend that you interview multiple agents and work with someone that you are comfortable with from start to finish.
Yes, the best deal is important and we definitely want you to find that; however, finding a lender who is responsive, empathetic and understanding of your needs, and willing to take the time to get to know you and your needs is just as important. A bad lending process can not only sour the enjoyment of buying a home, but can also kill a deal. Make sure you and your lender are 100% on board with one another before you pull the trigger to work with someone.
If you are confused, have questions, and are looking for some guidance in the real estate game, look no further. Send me a message, text, or give me a call and we can get you on the road to winning the game of real estate.
THE BUYER'S RULEBOOK
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