What does PITI consist of?
PITI is the acronym for your monthly mortgage payment. It’s pronounced like the word “pity” and the letters stand for the four parts of that monthly payment, which are:
P stands for Principal That’s the part of the monthly payment used to pay down the balance of the loan. Your monthly principal payments, plus your down payment, add up to the equity you have in your home.
I stands for Interest This is what you pay the lender for the privilege of borrowing the money.
T stands for Taxes These are the property taxes you pay on the value of the land and the building.
I stands for Insurance This refers to both homeowner’s insurance and the mortgage insurance, which is generally required when your down payment is less than 20%.
The monthly PITI payment is compared to your monthly gross income as part of the process of approving your mortgage loan. It’s frequently called the housing ratio based on what your proposed monthly house payment is in comparison to your gross monthly income.
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