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
Sewer system built into the streets of a neighborhood that is capable of accommodating the excess water flow of a heavy storm without backing up or flooding. ...
method of land description that identifies a parcel by specifying its shape and boundaries. ...
An deir to an individual who died intestate and is entitled, under the distribution statute, to a portion of its proceeds. After all claims against the estate are satisfied, the ...
A situation that occurs when borrowed funds cost more than they produce. ...
Written agreement, guarantee, pledge, or promise annexed to the land between two or more parties to do or not to do something and is transferred to successive title holders. For example, in ...
Suppose you are a house hunter, buyer, seller, realtor, or investor. In that case, you've probably come across the term "Gross Rent Multiplier" or GRM. But what exactly is it? Let's shed ...
Device that places the ownership of real property with one or more trustees for security until the loan is paid by the debtor. It is used in place of a conventional mortgage contract in ...
Bond given by a building contractor to a public authority and guaranteed by a third party, usually a bonding company, that a contracted construction project will be completed within the ...
A saving bank owned by its depositors. They are mostly located in the northwestern United States and are an important supplier of real estate financing. All mutual savings banks are state ...
Have a question or comment?
We're here to help.