Costs
PITI
An acronym for Principal, Interest, Taxes, and Insurance — the four components that make up your total monthly mortgage payment. Lenders use your PITI to calculate your housing expense ratio (front-end ratio). For example, on a $300,000 loan at 6.5% with $400/month in taxes and $150/month in insurance, your PITI would be roughly $2,446/month. Understanding PITI helps you budget accurately for homeownership.
Why It Matters
Knowing about PITI helps you budget accurately for your home purchase. Many first-time buyers are surprised by costs beyond the purchase price, and understanding each component prevents unwelcome surprises at the closing table.
When planning your homebuying budget, factor in piti early in the process. Ask your lender or real estate agent for estimates specific to your situation and location, since these costs can vary significantly.