"Total Monthly Mortgage Payment"...

[ScrimpAndSave]

When people talk about a total monthly mortgage payment, are they talking about just principal and interest? Or are they including property taxes and insurance as well?

Maybe this is a dumb question. Sorry.

[momof1in150]

Total Monthly Mortgage = PITI (Principal, Interest, Taxes and Insurance. Most people pay it as one payment to their mortgage company and the mortgage company pays the taxes and insurance.

[jIM_Ohio]

If you put 20% down you have choices- you pay taxes or you escrow taxes. You pay insurance or you escrow insurance. If you pay, the taxes and insurance part are paid by you out of your checking account and you need to budget for this. If you escrow. the money is included with mortgage payment.

If you pay, you can earn interest on the money while it accumulates.
If you escrow, no interest is earned and closing costs to set up the escrow account are needed.

[disneysteve]

I think most people are referring to PITI since most people escrow their taxes and insurance payments.

[MonkeyMama]

Agreed with the above.

But you bring up a good point. When I refer to my mortgage payment I just refer to the mortgage. If I refer to everything I call it PITI. Some people escrow their taxes/insurance and some don't so you probably get people talking about different things when they refer to their mortgage payment.

[simpleyme]

I just am referring to my monthly payment ( Principle and interest ) never my tax and insurance as I do not pay them monthly
I pay my insurance in May and my tax in late October or early November

[ScrimpAndSave]

Thank you for all of your responses.

The reason why I ask is because I read somewhere that my mortgage payment shouldn't exceed $1500 and I didn't know what that included.

We will be making a gross amount of $110,000. We will have $130,000 of student loan debt (around $800-$900 a month). We will have approx. $80,000 saved. We have no other debt. I am trying to figure out how much of a monthly payment will be comfy for us.

[disneysteve]

When you read the advice that your payment shouldn't exceed 28% of income, that refers to PITI.

[ScrimpAndSave]

Thanks Steve! That answers my question. Although it should not exceed 28%, you also should have total debt that exceeds 36%, correct? And that would include the mortgage payment...

...I think that is really going to corner us.

[disneysteve]

Yes, the rule of thumb (and rules are made to be broken) is 28% to house and 36% total to debt servicing.

You always have to look at the big picture, though. A house with a fixed-rate mortgage means the payment stays steady for 15 or 30 years. So perhaps on day one, it will be 30 or more percent of income, but after a few years, income will have risen and the payment will still be the same, so the percentage drops. It can be worth stretching a little early on if you are being frugal everywhere else.

[PrincessPerky]

is that take home income or gross?

[ScrimpAndSave]

Princes perky...that is a good question. I always assumed take home.