Question:

PITI Definition

Answer:

PITI stands for Principal, Interest, Taxes and Insurance. These are the four major components a monthly mortgage payment consists of.

  • Principal - this is the money the borrower uses in order to pay down the loan balance.
  • Interest - this is the additional money the lender charges for their service.
  • Taxes - any property taxes that the borrower should pay as a homeowner.
  • Insurance - includes property insurance as well as PMI (private mortgage insurance).

Generally, the PITI payment will be split in two - (PI) principal and insurance will go to the loan account, and (TI) taxes and insurance will go into the escrow account.

The loan to debt ratio is usually calculated on the basis of your PITI payment and your gross monthly income.

When you are comparing lender quotes, you should ask about how much the PITI payment would be and what it will include with this particular lender. Some lenders will have additional charges flashed into the PITI and you would not want that.

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Common misspellings: mortage and morgage