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Calculate your complete monthly home loan payment including principal, interest, property taxes, homeowners insurance, and PMI. Get accurate PITI estimates for Bergen County homes.
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Understanding PITI: Your Complete Home Payment
When budgeting for a home, you need to understand that your monthly payment includes more than just principal and interest. PITI represents your total housing expense:
Principal
The portion of your payment that reduces your loan balance. Builds equity in your home.
Interest
The cost of borrowing money. Calculated as a percentage of your remaining loan balance.
Taxes
Property taxes paid to your local municipality. Usually escrowed and paid by lender annually.
Insurance
Homeowners insurance protecting your property, plus PMI if down payment is less than 20%.
Lenders evaluate your ability to afford the complete PITI payment, not just principal and interest. Understanding each component helps you budget accurately for homeownership.
The 28/36 Rule: How Lenders Qualify You
Lenders use the 28/36 rule to determine how much house you can afford:
28% Front-End Ratio
Your total housing payment (PITI) should not exceed 28% of your gross monthly income.
Example: $8,000/month income × 28% = $2,240 max PITI payment
36% Back-End Ratio
Your total debt payments (PITI + car loans + credit cards + student loans) should not exceed 36-43% of gross income.
Example: $8,000/month income × 36% = $2,880 max total debt payments
Note: Some loan programs allow higher ratios. FHA loans may accept up to 31/43%, and conventional loans with strong credit can go to 28/45%. VA loans don't use the front-end ratio at all.
Bergen County Property Tax Guide
Bergen County has some of New Jersey's highest property taxes, averaging 2.5-3% of home value annually. Here's what to expect in popular municipalities:
| Municipality | Avg Tax Rate | $600K Home | Monthly |
|---|---|---|---|
| Ridgewood | 2.89% | $17,340/year | $1,445 |
| Paramus | 2.76% | $16,560/year | $1,380 |
| Tenafly | 2.92% | $17,520/year | $1,460 |
| Fair Lawn | 2.68% | $16,080/year | $1,340 |
| Mahwah | 2.45% | $14,700/year | $1,225 |
Property taxes can vary significantly even within the same town based on assessment values. Always verify exact tax amounts for specific properties before making offers.
Understanding PMI (Private Mortgage Insurance)
PMI protects the lender if you default on your loan and is required on conventional mortgages with less than 20% down payment. Here's what you need to know:
PMI Costs
- 5-10% down:1.0-1.5% annually
- 10-15% down:0.5-1.0% annually
- 15-20% down:0.3-0.7% annually
On a $500K loan with 10% down, expect $375-625/month in PMI.
Removing PMI
- Request removal at 20% equity through payments or appreciation
- Automatic cancellation at 22% equity (original schedule)
- May require new appraisal to prove home value
- Must be current on payments with good payment history
Alternative: Some lenders offer "piggyback" loans (80-10-10 or 80-15-5) that avoid PMI by splitting your mortgage into two loans. Contact us at (718) 812-7798 to explore PMI-free options.
Complete Bergen County Home Loan Example
Let's calculate the complete PITI payment for a typical Ridgewood home purchase:
Purchase Details
Home Price
$700,000
Down Payment (15%)
$105,000
Loan Amount
$595,000
Interest Rate
6.5%
Monthly PITI Breakdown
Income Required (28% rule): $20,453/month or $245,439/year gross income
Frequently Asked Questions
What is PITI in a home loan?
PITI stands for Principal, Interest, Taxes, and Insurance - the four main components of your monthly home loan payment. Principal reduces your loan balance, interest is the cost of borrowing, taxes are property taxes, and insurance includes homeowners insurance and PMI if applicable. Lenders use PITI to calculate your total housing expense when qualifying you for a mortgage.
How do I calculate my monthly home loan payment?
Calculate principal and interest using the amortization formula: P = L[c(1+c)^n]/[(1+c)^n-1], where L is loan amount, c is monthly interest rate, and n is number of payments. Then add monthly property taxes (annual taxes ÷ 12), homeowners insurance (annual premium ÷ 12), and PMI if down payment is less than 20%. The sum is your total PITI payment.
What percentage of income should go to home loan payments?
Lenders typically require that your total housing payment (PITI) does not exceed 28% of your gross monthly income, known as the front-end ratio. Your total debt payments including PITI should not exceed 36-43% of gross income (back-end ratio). These are general guidelines; some loan programs allow higher ratios with compensating factors like large down payments or high credit scores.
How much are property taxes in Bergen County NJ?
Bergen County property taxes average 2.5-3% of home value annually, varying by municipality. For example, a $600,000 home in Ridgewood might have $15,000-18,000 annual property taxes ($1,250-1,500 monthly). Some towns like Tenafly and Alpine have higher effective tax rates, while others like Mahwah may be lower. Check your specific town for accurate tax estimates.
What is PMI and when can I remove it?
PMI (Private Mortgage Insurance) protects the lender if you default and is required on conventional loans with less than 20% down payment. PMI typically costs 0.5-1.5% of the loan amount annually. You can request removal once you reach 20% equity through payments or appreciation. Lenders must automatically cancel PMI when you reach 22% equity based on the original amortization schedule.
How much should I budget for homeowners insurance?
Homeowners insurance in Bergen County typically costs $1,000-2,500 annually ($85-210 monthly) depending on home value, coverage limits, and deductibles. Higher-value homes require more coverage and cost more to insure. Factors affecting rates include home age, construction type, proximity to fire stations, and claims history. Shop multiple insurers for competitive rates.
Get Your Complete Home Loan Analysis
Contact Jimmy Joseph MBA for personalized home loan guidance and accurate payment estimates for your Bergen County home purchase.
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