PITI is an acronym for Principal, Interest, Taxes and Insurance. It is the collective dollar amount a borrower pays when buying a home with a mortgage loan. PITI is factored into the borrower’s monthly payments when determining how much house the borrower(s) can afford.
What is Principal?
Principal is the total amount of money you borrowed from the lender in order to make your home purchase. This amount will be the sales price of the home minus any down payments you made.
What is Interest?
Interest is the amount the lender charges the borrower for them giving the loan to make the purchase or refinance transaction.
What are Taxes?
Taxes refer to property taxes you have to pay to your county. In some cases you pay these directly to your tax assessor’s office, but often mortgage lenders prefer to escrow them and pay them on your behalf so that the lender knows the taxes are getting paid each period.
What is Insurance?
This refers to homeowner’s insurance that you have to pay based on the value of your property and the likelihood of replacing it or fixing it in some way should it become structurally damaged (as in hail, wind, fire or some other external sources. Theft may also be covered by your homeowners insurance.)