What is PITI by definition?


Every homebuyer should know what PITI is. Basically, this is the monthly mortgage payment.

By definition, the PITI acronym stands for principal, interest, (property) taxes and (homeowners) insurance. The PITI payment is also called Monthly Housing Payment.

Sometimes, the monthly mortgage payment refers to the PI portion only - that is, principal and interest. However, all homeowners pay property taxes and insurance and upon signing the loan agreement, the lender usually insists on opening an escrow account for the borrower to put some funds in advance for taxes and hazard insurance.

Homeowner Association Fee may be required from those buying a townhome or condominium, in addition to PITI.

Lenders calculate the expected PITI mortgage payment for consumers to make sure the maximum monthly housing ratio allowed with the particular home loan program is not exceeded. Property taxes and homeowners insurance vary from area to area - taxes can be 1 to 2% per year, insurance shouldn't be more than .004% per year and PMI depends on the LTV and varies from over 1% for 95% LTV and higher to .375% for 85% LTV and less.

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