What Does PITI Mean?

As you’re working toward buying a home, you’ll encounter a lot of words and acronyms that apply to the mortgage lending process. “PITI” may be one you see frequently. Let’s break this down:

• 
  Principal
  This is the balance of your loan, excluding interest. On a mortgage statement, this word refers to the amount you paid toward the balance during the statement’s time period.
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• Interest
  The amount a lender charges you to borrow their money, expressed as a percentage.
  
  
• Taxes
  ​The amount owed for real estate taxes assessed by the locality you live in.
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• Insurance
  ​This includes homeowners/hazard insurance and any mortgage insurance.

Understanding mortgage insurance

Mortgage insurance is the way your lender protects themselves against default. Depending on your loan type, it can have an initial premium payment as well as a monthly one. The type of mortgage insurance required depends on the type of loan.

Conventional loans require Private Mortgage Insurance (PMI) if your down payment is less than 20%.

FHA loans require a Mortgage Insurance Premium (MIP) regardless of your down payment amount. This includes an upfront premium of 1.75% of the loan amount in addition to a monthly premium. The upfront premium can be financed into the loan.

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