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Mortgages & financing

PITI

Also called principal, interest, taxes and insurance

In short

PITI stands for principal, interest, taxes and insurance, the four parts of a typical monthly mortgage payment. Lenders use it to judge whether a borrower can afford a home.

Formula
P + I + T + I
Taxes and insurance
Usually paid via escrow
Used for
DTI and affordability
Often added
PMI and HOA dues

The four parts

  • Principal: pays down the loan balance.
  • Interest: the lender's charge for the loan.
  • Taxes: property taxes, usually collected monthly into escrow.
  • Insurance: homeowners insurance, and flood insurance where required.

PMI and HOA dues aren't part of the acronym, but lenders count them in your housing payment.

Why lenders care

Your PITI is the housing part of your debt-to-income ratio. Lenders compare it, plus your other debts, with your gross monthly income to decide how much you can borrow.

PITI and investment properties

Investors use PITI to estimate monthly cash flow on a rental. If rent minus PITI and other expenses is negative, the property loses money each month even if it appreciates.

The formula

PITI = Principal + Interest + Taxes + Insurance
Taxes
Annual property tax ÷ 12
Insurance
Annual homeowner's insurance ÷ 12 (plus mortgage insurance, if any)
Try it in the Mortgage Calculator →
Example

Adding up a monthly payment

On a $300,000 loan at 6.5% for 30 years, principal and interest is about $1,896. Property taxes are $4,200 a year ($350 a month) and insurance is $1,500 a year ($125 a month). PITI = $1,896 + $350 + $125 = $2,371. With $120 a month of PMI, the total housing payment is $2,491.

PITI vs. Amortization

PITI

PITI stands for principal, interest, taxes and insurance, the four parts of a typical monthly mortgage payment. Lenders use it to judge whether a borrower can afford a home.

Amortization

Amortization is the process of paying off a loan with regular, fixed payments over time. Early payments go mostly to interest; later payments go mostly to principal.

The differenceAmortization covers only the principal and interest schedule; PITI adds taxes and insurance to give the full monthly payment.

Frequently Asked Questions

Related terms

EscrowBuying & closingEscrow is an arrangement where a neutral third party holds money or documents until the conditions of a deal are met. The term also refers to the account a lender uses to pay a borrower's property taxes and insurance.Debt-to-Income Ratio (DTI)Mortgages & financingDebt-to-income ratio (DTI) is the share of your gross monthly income that goes to debt payments. Lenders use it to decide how large a mortgage payment you can afford.Private Mortgage Insurance (PMI)Mortgages & financingPrivate mortgage insurance (PMI) protects the lender, not the borrower, if a borrower defaults on a conventional loan. It is usually required when the down payment is less than 20% of the home's value.MortgageMortgages & financingA mortgage is a loan used to buy real estate, secured by the property itself. If the borrower stops paying, the lender can take the property through foreclosure to recover what is owed.Mortgage Pre-ApprovalMortgages & financingA mortgage pre-approval is a lender's conditional commitment to lend up to a set amount, based on verified income, assets and credit. Sellers often expect one before accepting an offer.Down PaymentMortgages & financingA down payment is the part of a home's purchase price the buyer pays upfront in cash rather than borrowing. It is usually stated as a percentage of the price and is due at closing.Closing CostsBuying & closingClosing costs are the fees and prepaid expenses paid to complete a real estate purchase, beyond the price and down payment. Buyers typically pay about 2% to 5% of the loan or purchase price.Loan-to-Value Ratio (LTV)Mortgages & financingLoan-to-value ratio (LTV) compares the size of a mortgage with the property's value. A lower LTV means more equity and less risk for the lender, which often brings better loan terms.

Learn more in the knowledge base

How Much House Can You Afford?Guide · 6 min readThe right price is the one you can pay every month without strain and still keep savings for repairs and emergencies. This guide shows how lenders measure affordability, what they leave out, and how to build a budget that works for you.How to Get Pre-Approved for a MortgageGuide · 7 min readA pre-approval tells you, and the sellers you make offers to, how much a lender is prepared to lend after checking your income, assets and credit. This guide explains how it differs from pre-qualification, what to gather, how to compare lenders and what can change the answer before closing.Check Your Finances Before You Buy: Credit, Debt and Cash ReservesGuide · 7 min readYour credit, debts and savings decide which loans you can get, how much you can offer and how much room you have for surprises. Checking them before you shop gives you time to fix problems. This guide covers credit reports, debt-to-income, cash to close and the extra reserves distressed properties call for.
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Disclaimer: The information on this page is for general educational purposes only and is not legal, financial, tax or investment advice. Laws, lending rules and market conditions vary by state and change over time, and any figures shown are estimates. Before you buy, sell, finance or bid on a property, consult a qualified attorney, financial advisor, lender or licensed real estate professional about your situation.