The mortgage industry has its own language, and in order to understand it, homebuyers need to learn different acronyms and jargon when shopping for a home loan. A typical home loan payment or mortgage payment involves a single payment, which is the sum of four different line items: the loan principal, interest, taxes, and insurance – also referred to as PITI.  Before you set your sights on a home, know if you can afford the costs by learning what PITI is and how it impacts your monthly mortgage payments. What does PITI stand for?  PITI stands for the loan principal, interest amount, taxes, and insurance on your home – the four major elements that make up mortgage payments.  Homebuyers often underestimate the true cost of homeownership by failing to take into account property taxes and homeowners insurance. It’s crucial that you budget for all the components of your mortgage payment before purchasing a home. Get pre-approved and secure your dream home Work with a lender to find the right loan for the home you love. Get pre-approved   What is PITI? The four components Now that we know what PITI stands for, let’s break down each of the four components and analyze the individual elements that make up your monthly mortgage payment. 1) Principal The mortgage principal is the loan amount before any interest is calculated. This is the base amount of your home purchase price minus any down payment you make.  We’ll use a hypothetical home purchase for reference; if you buy a home for $450,000 with a 20% down payment ($90,000), your mortgage principal amount will be $360,000. Over your mortgage term, you pay substantially more than the original $360,000 to the lender in the form of loan interest. The principal is the base amount used for loan calculations to determine if they will extend a loan to you.  2) Interest Your mortgage interest rate is what you pay the lender as part of your monthly mortgage payment to borrow the funds to purchase your home. The mortgage lender calculates interest as a percentage of your outstanding principal. If your principal loan is for $360,000 and your lender charges you an interest rate of 6%, this means that you will pay $21,600 (6% of $360,000) in interest for the first year of your mortgage. Your mortgage interest and principal payments are itemized on a mortgage amortization table. The amortization charts show how much each mortgage payment pays down your principal and interest. When you first start making mortgage payments, most of your monthly payment goes toward interest instead of the principal.  This split shifts over time, and eventually, the amount you pay toward interest decreases, and more is paid toward the principal. As the principal amount of your loan decreases, you start to earn equity on your home. Equity is the portion of your home that you own outright. Your interest decreases as well, as you only pay interest on the principal amount you have not paid off. For our example, you will pay $21,600 in interest over the first year of your $360,000 mortgage. By the time you have paid down $260,000 of that principal, your principal amount will be $100,000; at that point, you’ll pay interest of $6,000 annually (6% of $100,000). 3) Taxes When you own your house, you pay taxes on the property to your local government to maintain roads, emergency services, police, firefighters, schools, and more. Buyers often overlook property taxes when estimating homeownership costs, but it is important to consider this recurring annual cost when you’re searching for your new home. Property taxes vary by location and are the most expensive tax homeowners pay. Taxes may be higher in a newer neighborhood or an area coveted by many homeowners. They are often less if you live just outside coveted neighborhoods and in rural areas.  The amount of property tax you pay is determined by the local property tax rate and the value of your home. A general guideline to estimate property taxes is to allocate approximately $1 for every $1,000 of your home’s value, paid on a monthly basis.For example, if your home is worth $450,000, you can expect to pay around $450 per month in property taxes or $5,400 per year.  As part of the home purchase process, most states require that you get an unbiased, official appraisal to estimate your taxes accurately. Your lender usually orders the home appraisal and includes the cost in their list of closing costs. After you close on your home purchase, keep in mind that your local government will regularly reassess properties every few years for tax purposes, which could lead to a change in your tax bill. 4) Insurance The “insurance” component of PITI refers to homeowner’s insurance and, when it’s required, private mortgage insurance (PMI). Let’s discuss each of these concepts in more detail.  Private mortgage insurance (PMI) Your PMI rates depend on how much of a down payment you made and your credit score. If you’re putting down less than 20% on a conventional loan, you’re required to pay for private mortgage insurance (PMI), which protects the lender if you default on your mortgage payments. Once you build at least 20% equity in your home — and your loan-to-value (LTV) ratio is 80% or less — you can get rid of PMI. For FHA loans, a similar mortgage insurance premium has to be paid throughout the life of the loan on any FHA-backed mortgage loan. If your PMI comes in at a rate of 1%, here’s how you’d calculate a mortgage of $360,000: $360,000 x 1% = $3,600 per year; $3,600 ÷ 12 monthly payments = $300 per month. Homeowners insurance Most mortgage lenders require a homebuyer to purchase and maintain homeowners insurance over the entire loan term. Homeowners insurance covers you and the lender if something catastrophic happens to the home, and you need to rebuild or move. Most homeowners insurance policies cover your home in the event of a break-in, fire, or storm damage.  Most insurance companies require you to buy additional coverage for damage from earthquakes or flooding. You can also purchase insurance riders to cover items of significant value, such as an expensive musical instrument, art, or jewelry. If you buy a condominium, you’ll also pay a homeowners association fee. Your lender may consider your HOA fee your insurance as the HOA carries its own insurance that covers the building, and thus you may not need another policy.  Property insurance amounts can vary among different insurances. It’s wise to shop around after the seller accepts your purchase contract, and before you close on the property, to get a good idea of reasonable rates. Insurance companies consider these factors when calculating an insurance premium: The home’s value Whether you live in an urban area or a rural area Whether you live in an area with high climate risk How close your home is near a fire department or fire hydrant  Whether you have an insurance risk on your property, i.e., something could injure children, such as a trampoline, pool, or specific dog breed  How many insurance claims you make each year for other types of insurance When estimating your homeowner’s insurance costs, it’s helpful to keep a general rule of thumb in mind. On average, you can anticipate paying approximately $3.50 per every $1,000 of your home’s value in annual homeowner’s insurance premiums. For instance, if your property is valued at $450,000, you can expect to pay around $1,575 per year for insurance coverage, which translates to roughly $131 per month. How to calculate PITI Before you start your search for a house, it’s a good idea to calculate PITI to determine your price range and help you find a mortgage option that will fit your budget. The exercise will make you a more rational home buyer and keep you from falling in love with a house outside your price range.  The simplest way to calculate PITI is by using an online monthly mortgage calculator. Redfin’s mortgage calculator includes the principal and interest, taxes, insurance, HOA, and PMI. You can also add in your location for more accurate estimates. PITI and the 28% Rule Your PITI gives you a rough idea of what purchase price range you can afford. One way to identify a purchase price within manageable limits is to use the housing expense ratio. To ensure your ongoing ability to make your mortgage payments, home finance experts typically recommend that your housing costs should be equal to or below 28% of your monthly household budget. If your PITI is more than 28% of your monthly budget, your lender may require you to pay for additional mortgage insurance. In our example, you can estimate your housing expense ratio by dividing your PITI by your total monthly income. If your household income is $10,000 a month, your PITI will make up about 28% of your monthly budget, well within recommended guidelines. ($2,800/$10,000 = 28%.) Keep in mind that PITI may just account for just some of your monthly expenses when owning a home. Depending on where you live and how you are paying for your home, there may be additional costs to consider. Additionally, the components that make up PITI are broadly defined here; there is often more complexity that goes into each part of PITI. How PITI impacts loan approval During the home buying process, it can be easy to trick yourself into thinking you can afford a more expensive home if you only look at your mortgage’s principal and interest cost without considering the total PITI with taxes and insurance.  For instance, let’s take a 30-year mortgage on a $450,000 property, assuming a property tax rate of 1.25% ($5,625 per year) and an annual homeowners insurance premium of $3,600. In this scenario, your monthly financial commitment would go beyond just the principal and interest amount, as you would need to allocate an additional $581 to cover taxes and insurance. Understanding and accounting for these factors will provide you with a comprehensive understanding of the actual costs involved in homeownership. Here is a breakdown of the example discussed above.    Principal and Interest PITI Interest rate 7% 7% 20% down payment $90,000 $90,000 Property taxes N/A $450 Homeowners insurance N/A $131 Private mortgage insurance N/A N/A Monthly payment $1,800 $2,381 How DTI factors in The principal balance will factor into your debt-to-income (DTI) ratio. Your DTI ratio gives lenders an idea of how capable you are of managing money and the likelihood that you will consistently make your monthly payments. To determine your DTI, the lender uses your total minimum monthly debt obligation and divides it by your gross monthly income to arrive at a percentage. This calculation also includes payments on credit card accounts, auto loans, student loans, and other recurring debt payments. Lenders consider you a higher risk if your DTI ratio exceeds 43%, some lenders will allow a DTI as high as 50%.  Don’t overlook other housing costs PITI is just one fundamental concept to understand before applying for a mortgage. As you consider how much house you can afford, you’ll also need to plan for additional costs typically associated with homeownership. These include HOA or condo fees, which can range from $100 to $1,000 per month, with an average of $200 to $300. Additionally, budgeting for repairs and maintenance is crucial, with a general guideline of saving 1% to 5% of your home’s value annually. For a newer $450,000 home, this would mean setting aside $4,500 to $22,500 per year. Utility bills for electricity, water, gas, sewer, cable, trash, and internet should also be factored in, and contacting the utility company or asking the seller or neighbors can help estimate these costs. The bottom line on PITI Buying a home is very exciting, but before signing your mortgage contract, know what payment amount you can afford based on PITI and other monthly costs. The more you understand the home buying and mortgage process and the total cost of homeownership, the easier it will be to finalize your purchase decision. Your home purchase represents an important milestone in your life – avoid confusion and uncertainty by gaining a solid understanding of PITI and the cost of homeownership.  The post What is PITI and How Does it Affect Your Mortgage? appeared first on Redfin | Real Estate Tips for Home Buying, Selling & More.

Orlando, Florida may be famous for its magical theme parks but it’s also home to a bunch of cost-free delights that many may not be aware of. Whether you’re a thrifty traveler, a local resident saving up for a house in Orlando, or just moved into an apartment in the area, there’s no need to dig deep into your wallet to enjoy this vibrant city. In this Redfin article we’ve gathered free activities that showcase the best of what Orlando has to offer. From tranquil natural springs to captivating art exhibitions, these attractions are proof that the best things in life (or at least in Orlando) are indeed free. So, lace up your sneakers, bring your sense of adventure, and prepare to explore the less-trodden, but equally enchanting, side of Orlando without spending a dime. 1. Lake Eola Park Nestled amidst the hustle and bustle of Downtown Orlando, Lake Eola Park is a verdant oasis that bursts with life and energy. Visitors can walk along picturesque walking trails adorned with blooming flora that wrap shimmering Eola lake, or enjoy a leisurely lunch in one of the many scenic spots that dot the park. The park’s star attraction is the fleet of iconic swan paddle boats that invite you to explore the lake at a tranquil pace. Beyond the daily offerings, Lake Eola Park frequently transforms into a vibrant venue for community events, including enthralling concerts, outdoor movie nights under the starry sky, and a bustling weekly farmer’s market that showcases a variety of fresh, local produce. 2. Disney Springs Living or visiting Orlando would be incomplete without experiencing the magic of Disney. While the theme parks often require hefty admission fees, Disney Springs offers a taste of Disney enchantment for free. This sprawling outdoor complex dazzles with its intricate architecture, lush landscaping, and an electric atmosphere. Stroll along the beautifully designed paths, and you’ll encounter a cornucopia of dining and shopping options. Yet, the true allure of Disney Springs lies in its rich offering of free entertainment – spontaneous performances spring up around every corner, and talented live musicians fill the air with a diverse blend of music. 3. Orlando Art Museum’s First Thursdays If you’re an art enthusiast or simply appreciate the joy of creative expression, a visit to the Orlando Art Museum’s First Thursdays is definitely an option worth considering. Every first Thursday of the month, the museum opens its doors for free to the public for an evening of new exhibitions, live music, and a celebration of community artists. Spectators can admire local and international art pieces, immerse themselves in the diverse range of styles on display, and perhaps even strike up a conversation with the talented artists behind the works. It’s not just a museum visit – it’s a journey into the heart of Orlando’s vibrant art scene, and a testament to the city’s commitment to fostering local talent and creativity. 4. Harry P. Leu Gardens Harry P. Leu Gardens is a horticultural haven spread across 50 gorgeous acres. Whether you’re a seasoned botanist or simply a lover of natural beauty, these gardens promise a serene retreat from the city. On the first Monday of every month, entry is free, providing the perfect opportunity to explore the winding pathways that lead you through a plethora of unique gardens, each hosting a different constellation of flora. Lose yourself amidst tropical rainforests, amble through the butterfly garden, or step back in time in the historical rose garden. The Harry P. Leu Gardens are a testament to nature’s boundless beauty. 5. Fort Christmas Historical Park A short drive from Orlando brings you to Christmas, Florida, where the intriguing Fort Christmas Historical Park awaits. This park acts as a window into Florida’s vibrant past, dominated by a full-scale replica of a fort from the Second Seminole War. Surrounding the fort, seven meticulously restored wooden shelter houses built by early Florida and Georgia settlers, bring the 19th-century Florida pioneers back to life. Entry to the park is free, inviting you to journey through time and gain insights into the historical tapestry that constitutes modern Florida. 6. Winter Park’s Farmers’ Market Winter Park’s Farmers’ Market is more than just a place to buy fresh produce – it’s a cultural experience. Every Saturday, the historic old train depot comes alive with a vibrant assortment of stalls that showcase the region’s agricultural bounty. As you weave your way through the market, you’re not just shopping but also engaging with local farmers, sampling an array of regional produce, and soaking in the buzzing community atmosphere. Beyond the market, Winter Park itself is a gem worth exploring. Its charming, tree-lined streets, quaint boutiques, and cozy cafes provide the perfect backdrop for a great day of exploration. 7. CityArts Orlando Located in the vibrant heart of downtown Orlando, CityArts Orlando is a beacon for the arts. It’s a space where local and international artists converge, showcasing their talents across multiple galleries. With free admission, this hub of creativity invites you to step inside and witness Orlando’s thriving art scene. Each room bursts with a kaleidoscope of colors and styles, hosting everything from contemporary digital art to traditional oil paintings. Here, art isn’t just displayed – it’s experienced. Each visit is a unique journey in itself, offering a window into the minds of the artists and a pulse on the city’s cultural heartbeat. 8. Orlando Public Art and Sculptures Orlando’s spirit of creativity extends beyond the gallery walls and into the city’s streets. Go on a self-guided tour to discover an array of public art and sculptures that pepper the cityscape. From the powerful narratives of the ‘See Art Orlando’ public sculpture collection in downtown to the hidden gems scattered throughout the city, this tour is a testament to Orlando’s commitment to making art accessible and integral to everyday life. Each piece tells a story, communicates an idea, or sparks a conversation, transforming a simple walk into a cultural adventure. 9. Kelly Park and Rock Springs Run Just a short drive from Orlando’s city center, you’ll find the natural paradise of Kelly Park and Rock Springs Run. The centerpiece of this park is its stunning natural springs, which serve as the starting point for a beautiful, lazy river. Free entry during weekdays in off-peak months allows you to experience the tranquility of floating down this crystal-clear river, surrounded by lush, green Florida wilderness. It’s a welcome escape from the city, offering opportunities for swimming, picnicking, and wildlife spotting. It’s not just a park visit, but also a chance to reconnect with nature. 10. Black Hammock Adventures’ alligator exhibit Nestled on the shores of Lake Jesup, Black Hammock Adventures offers a unique wildlife experience. Its standout feature is a free live alligator exhibit, where you can observe these fascinating reptiles up close. Beyond the exhibit, the area is a haven for birdwatchers and wildlife enthusiasts. Lake Jesup, with its dense alligator population, promises frequent sightings of these powerful creatures in their natural habitat. A visit to Black Hammock Adventures is not just about witnessing wildlife though, it’s about immersing yourself in Florida’s wild landscapes and developing a deeper appreciation for its unique ecosystems. The post No Wallet, No Worries: 10 Free Things to Do in Orlando appeared first on Redfin | Real Estate Tips for Home Buying, Selling & More.

A condo still sells for less than a single-family home, but prices remain firm and rising in many areas, including most of South Fla. MIAMI – The good news is that the national median condo sale price of $331,000 remains lower than the average single-family home price in the U.S., which was $348,079 in 2022, according to the National Association of Realtors. But the other side of the coin shows that condo prices are on the rise in Florida, particularly in the Miami region, which is good news for sellers. The median sale price of condos in Miami increased from $525,000 in December of 2021 to $530,900 in December of 2022, according to a Norada Real Estate Investment report. The median price of existing condos also rose by 5.5%, from $355,000 to $374,500 during that one-year span, a good barometer for investors. Data compiled by the National Association of Realtors indicated that in the Miami-Fort Lauderdale-Palm Beach metro area, the median condo sale price was $315,000 in the third quarter of 2022, a 17% increase from the third quarter in 2021 when it was $269,000. Going back just to 2019, the median condo sale price for that metro area was $200,000. Three other metro areas showed large increases as well from 2021 to December 2022: Tampa-St. Petersburg-Clearwater reflected a 28.9% increase (to $290,000); Cape Coral-Fort Myers had a 27.7% increase (to $325,000); and North Port-Sarasota-Bradenton climbed 25% (to $375,000). In 2022, the median price for a townhouse or condo in all of Florida was $306,500, up from $252,000 in 2021. Both townhouse and condo prices have generally increased since 2012, when the median sale price was $106,620. As of Sunday, Redfin listed 154 condos for sale on Key Biscayne, ranging from $525,000 for a 1-bedroom unit to $11.5 million for a 5-bedroom corner property at the Ocean Club. Sales got off to a slow start this year throughout most of Florida. According to a report by Florida Realtors, single-family home sales across the state in January were down by 32.5% compared to the same period in the previous year. The decline in townhouse/condo sales was even steeper in January at nearly 41%. Condos are often appealing to buyers because, not only are the up-front costs generally less than single-family homes in that area, but amenities such as swimming pools and fitness centers and not having to worry about landscaping make it a better choice for some, according to a report from Rocket Homes, titled “How much does a condo cost in 2023?” Of course, there are condo fees ($350 a month is the U.S. average) and insurance ($429 a year is the U.S. average), as well as the average monthly mortgage of $1,100 – all figures provided by the National Association of Realtors. Obviously, insurance rates would be much higher in Florida, averaging $83 a month, according to a report by ValuePenguin, titled “Average Cost of Condo Insurance (2023).” The $83 a month figure (the highest in the U.S.) reflects a 95% difference from the national average of $43 a month. According to a report by The Zebra, titled “The Pros and Cons of Buying a Condo in Today’s Market,” it lists several pros and cons, including a strong sense of community, amenities and little maintenance on the plus side, with lack of privacy, condo association rules, limited storage space and resale challenges on the minus side. So, is buying a condo worth it? “The honest answer is, it really depends on what you’re looking for,” that report said. © Copyright 2023 IslanderNews.com