PITI
PITI stands for Principal, Interest, Taxes, and Insurance – the four main components of a typical monthly mortgage payment. This acronym represents the total housing payment that borrowers must budget for when calculating their ability to afford a home purchase.
Example
“The lender calculated that the borrower's PITI payment would be $2,400 per month, including principal, interest, taxes, and insurance.”
Memory Tip
Remember 'PITY the homeowner' - PITI sounds like pity, and these are all the costs you have to pity paying each month.
Why It Matters
Understanding PITI helps homebuyers create accurate budgets and avoid payment shock by accounting for all required monthly housing costs, not just the loan payment.
Common Misconception
Many first-time buyers focus only on principal and interest payments, not realizing that property taxes and insurance can add hundreds of dollars to their monthly payment.
In Practice
A homebuyer pre-approved for a $2,000 monthly payment discovers their total PITI will be $2,400 when including $200 for property taxes and $200 for homeowners insurance, requiring them to adjust their home search budget accordingly.
Etymology
PITI is a modern acronym created by mortgage lenders in the mid-20th century to bundle the four essential monthly housing costs together.
Common Misspellings
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