Clients Thinking About Buying Their First Home? Have PITI.

“What does it really cost to own a house, though? My best friend’s second cousin bought a Victorian fixer-upper and was bankrupt two years later.” The questions and concerns that escape the mouths of young renters can be incredibly revealing about the greatest obstacle for first time homebuyers.

Fear.  Fear of the unknown. Even worse, fear of the seemingly unknowable.

A big down payment, closing fees, an unanticipated sewer bill, a surprise insurance spike and didn’t the local news just do a piece about HOAs sending notices about unpaid dues transferring from the previous homeowner to the new?

From genuine concern about the initial costs of taking the first step on the home ownership ladder to unrealistic nightmare scenarios involving powerful banks, sinkholes and stubborn poltergeists, it’s hard to measure how many potential homeowners are still on the sidelines as a result of easily extinguished fear.

Swiftly introducing the young home shopper to PITI (principal, interests, taxes and insurance) payments is an effective means of providing an understanding of the month-to-month reality of owning a home while instilling confidence in their ability to control the process.

Punch in the price of a dream home along with interest rate, insurance and loan term (information that some first time homebuyers may not have even thought to ask during their initial budgeting) and it will become clear whether the new lifestyle as a homeowner allows for an annual Tahitian getaway or a staycation at Six Flags.

BankRate provides one of the more robust PITI calculators along with a practical glossary of real estate terms that represent an entirely new language to your client.

So if you’re dealing with a nervous first time homebuyer with a range of worries, have PITI. At the same time, steer them away from a Victorian-era home full of repair pitfalls. After all, there’s no calculator for common sense.