When you apply for a mortgage you might come across the abbreviation “PITI.” Here’s what it means…
PITI stands for Principal, Interest, Taxes and Insurance. Mortgage lenders want to be sure their borrowers are qualified to afford a monthly payment that typically includes these four items. Principal is the amount within your monthly payment that goes toward paying down the balance of the loan. Interest is the amount you’re paying to the lender for the priviledge of borrowing the money. Taxes refer to the property taxes you pay to your local municipality. Many lenders require that you escrow 1/12th of the annual real estate taxes with the lender each month to ensure the current year’s real estate taxes are paid when they become due. Insurance refers to both homeowner’s insurance and private mortgage insurance, if appicable. Most lenders require that you carry adequate insurance on your home – and that you name the lender as a lien holder on the property.
Consult your REALTOR® if you have any questions regarding PITI.
