What does the acronym PITI stand for in real estate?

The acronym PITI stands for Principal, Interest, Taxes, and Insurance. This term is commonly used in real estate to refer to the various components of a monthly mortgage payment.

Principal is the amount of money borrowed to purchase the property, and it decreases over time as payments are made. Interest is the cost of borrowing that principal and is typically expressed as an annual percentage rate. Taxes refer to property taxes that homeowners are required to pay to local governments, which are often collected in monthly installments along with the mortgage payment. Insurance includes homeowners insurance, which protects the property and its contents, and sometimes additional coverage such as flood insurance, that lenders may require.

Understanding PITI is crucial for buyers and real estate professionals alike, as it helps in accurately assessing total cost of homeownership and the budget needed for mortgage payments. Knowing how to break down these costs enables better financial planning for those looking to buy a home.