Definition of "PITI"
You open your mortgage documents and you see this big amount of money owed under “PITI”. But you have no clue as to what is the right PITI definition. Don’t worry; we got you!
PITI is not someone with an accent trying to say “pitty”. The correct PITI definition is of an acronym to the primary elements of many monthly mortgage payments:
- P for Principal
- I for Interest
- T for Taxes
- I for Insurance
So, Principal, Interest, Taxes, and Insurance - or PITI – are actually the main components of what you will pay back to the lender monthly once you get a mortgage. However, not all mortgages include taxes and insurance in the payments. That doesn’t mean they will charge you a “PI”; they’ll probably just single out principal and interest.
But saying that PITI is just an aggregation to make the understanding of borrower’s expenses is not the most thorough PITI definition. The PITI assembling is as important for the lender itself, so it can determine the affordability of an individual mortgage and approve it or decline it. The lender calculates one’s PITI to determine the borrower’s risk, just like the borrower does to determine if his pockets are big enough to purchase that home.
Check our Real Estate Questions page; maybe someone else had the same doubts you have and we answered it already!
Popular Real Estate Terms
Appraisal method that examines current and future economic conditions in a particular location to help in deriving property values ...
Low level of land positioned between mountains or hills. ...
Appropriateness of the soil for the designated purposes. An example is soil suitable for the growing of vegetables and fruit, or grazing for horses. ...
Concrete or timber beam that serves as a support in the wall structure of a building. Concrete tie beams are often reinforced with steel rods. ...
Lender has an equity interest in the property that is the subject of the loan. The lender shares in the increase in market price of the property as well as any net income generated. ...
Danger, hazard, risk, or peril. For example, jeopardizing a piece of property by pledging it as collateral for a loan. ...
System for human waste disposal where sewers do not exist. Pipes transport waste into septic tank and a leaching field purifies the fluids that come out of the septic tank before they join ...
Documentation of zoning requirements and changes thereto. ...
Investment made rationally and intelligently as would be expected by a professional person. A reasonable degree of safety and return are expected. A example is an office building with 99% ...
Have a question or comment?
We're here to help.