Mortgage What is PITI

What Is Principal, Interest, Taxes, Insurance—PITI?

Answer:

Principal is the amount of money that has been borrowed. Interest is the amount of money that is paid on the principal amount over the time period of the loan. Taxes are the amount of money that is paid to the government by the borrower on the principal amount plus interest. Insurance is the cost of insuring your product against damage or loss.

PITI is the sum of principal, interest, taxes, and insurance payments on a mortgage.

PITI is compared to a borrower’s monthly gross income to approve loans.

Mortgage lenders prefer PITI to be equal to or less than 28% of a borrower’s gross monthly income.

PITI is the acronym for Principal, Interest, Taxes, and Insurance.

PITI is meant to be a complete representation of what a monthly mortgage payment will cost.

PITI includes principal (the money you borrow), interest (the money you pay on your loan), taxes (which go towards the cost of your mortgage), and insurance (which covers potential losses in case of property damage or loss).

It’s important to know each component of PITI so you can calculate your monthly mortgage payments accurately.

key takeaways

PITI is an acronym for principal, interest, taxes, and insurance—the sum components of a mortgage payment.

Because PITI represents the total monthly mortgage payment, it helps both the buyer and the lender determine the affordability of an individual mortgage.

Mortgage payments consist of principal, interest, taxes, and insurance (PITI).

Property taxes and insurance are sometimes paid through a homeowners association fee.

PITI amounts will vary from year to year as taxes and insurance go up or down.

Advertisement