What Is PITI?
When a mortgage lender is trying to determine your ability to repay, one area at which it looks is your total monthly housing payment.
Your total monthly housing is typically calculated as follows:
- Your monthly mortgage principal payment
- Your monthly mortgage interest payment
- Your annual real estate tax bill, pro-rated to a monthly figure
- Your annual homeowners insurance bill, pro-rated to a monthly figure
Collectively, these elements — principal, interest, taxes, and insurance — are known as PITI.
This is what your monthly mortgage payment will be. Even with a fixed rate loan you payments can change annually based on changes in the tax and insurance rates. Each year your lender will perform an escrow analysis to determine if any changes should be made. Your payment may go up or down depending on the results of that analysis.
If your home is currently under a tax abatement you might see a significant increase when the abatement period expires and adjusts to the current tax rate.