What Is PITI?

Short answer

PITI stands for principal, interest, taxes and insurance, the four parts of a full monthly mortgage payment. Lenders qualify you on PITI (plus HOA dues when they apply), not on principal and interest alone. In South Florida, taxes and insurance can easily add 30% to 40% on top of principal and interest.

Definition

PITI is the total monthly housing payment: principal (the part that reduces the loan balance), interest (the lender's charge), property taxes and homeowners insurance, usually collected into an escrow account. When there is an HOA or mortgage insurance, lenders call the total PITIA.

Worked example

You buy a $500,000 house in Hialeah with 10% down, so the loan is $450,000. Suppose principal and interest come to $2,850 a month. Annual property taxes are $9,000 ($750 a month) and homeowners plus windstorm insurance is $6,000 a year ($500 a month). PITI = $2,850 + $750 + $500 = $4,100. If the loan also carries $150 of PMI, the qualifying payment is $4,250. Principal and interest alone would have understated your payment by $1,400.

The four parts

• Principal: reduces what you owe. Small in early years on a 30-year loan, larger later.
• Interest: the cost of borrowing. Rates vary daily; call for today's pricing.
• Taxes: the county tax bill divided by 12, based on the home's assessed value after your purchase.
• Insurance: homeowners (hazard), windstorm if separate, and flood if required by the flood zone.

HOA dues and mortgage insurance (PMI or FHA MIP) are added to reach the qualifying payment.

Why PITI matters

Your DTI is calculated on PITI plus HOA, so a building with $900 dues can cut your buying power by well over $100,000 compared with a house. Always ask for the full payment, not the principal and interest teaser.

Taxes and insurance are estimates at application. The Loan Estimate shows them, and the Closing Disclosure finalizes them.

In South Florida

The 'T' and the 'I' are where South Florida surprises buyers. Property taxes reset to the purchase price the year after you buy, so the seller's tax bill is not your tax bill. Homeowners insurance in Miami-Dade often includes a separate windstorm deductible, and homes in flood zones need a flood policy too. On condos, add HOA dues, which lenders count in the qualifying payment even though they are not escrowed.