PITI

PITI stands for Principal, Interest, Taxes, and Insurance — the four components of a typical US mortgage monthly payment. Lenders use PITI as the denominator of housing-related affordability ratios (the 28% front-end ratio in the 28/36 rule).

What goes into each component:

• Principal — the portion of the payment that reduces remaining loan balance. Front-loaded smaller; back-loaded larger under standard amortisation.
• Interest — what the lender charges for the privilege of borrowing. Front-loaded larger; shrinks over time as principal declines.
• Taxes — property taxes, typically held in escrow and paid by the lender on your behalf. US rates vary 0.3-2.5% of home value per year by state.
• Insurance — homeowner’s insurance (also typically escrowed). Sometimes includes PMI (Private Mortgage Insurance) if down payment is under 20%, and HOA fees if applicable (though those are technically separate from PITI).

PITI is the number to compare across loan offers — not the headline mortgage payment, which excludes taxes and insurance. Two mortgages with the same headline P+I payment can have very different PITI if the property taxes diverge (Texas vs Colorado, for instance).

Our mortgage calculator breaks the monthly payment into P+I and lets you add tax and insurance separately. For the broader affordability picture, see how much house can I afford?

PITIA — the version with HOA explicitly added: condos, planned-unit developments, and many newer subdivisions carry HOA fees that lenders include in the affordability calculation even though the borrower doesn’t escrow them. The acronym “PITIA” (with HOA Assessment) is the formal expanded version; some lenders report “total housing payment” instead. For a typical condo with $300 HOA fees and a $2,200 P+I payment, the difference is meaningful — a buyer qualifying for $2,800 PITI cannot actually afford the unit because PITIA is closer to $3,100. Always pull the HOA fee from the listing and add it manually when shopping condos. CFPB requires lenders to disclose HOA in the loan estimate.

Property-tax escrow shocks: the tax portion of PITI is set at closing based on the most recent assessment, but reassessments happen on a multi-year cycle in many US jurisdictions. After a year or two, the assessed value catches up to the actual purchase price and the property-tax bill jumps — sometimes by 30-50%. The escrow account runs short, and the monthly payment rises the following year to refill it plus cover the higher ongoing bill. New buyers regularly mistake this for “the mortgage went up” when in fact only the escrowed tax portion changed. Reference: CFPB — Loan estimate explainer.

Worked example

Buy a $450,000 home with 10% down (loan $405,000), 30-year fixed at 7.0%. Principal + interest = $2,695/month using the standard amortisation formula. Property taxes at 1.2% of value: $450,000 × 1.2% / 12 = $450/month. Homeowner’s insurance at $1,500/year: $125/month. PMI (LTV is 90%, above 80%) at 0.5%/year of loan balance: $405,000 × 0.5% / 12 = $169/month. Total PITI: $2,695 + $450 + $125 + $169 = $3,439/month. The headline “mortgage payment” ($2,695) understates the true monthly cost by 28%. Applying the 28% front-end DTI rule, this PITI requires gross monthly income of $3,439 / 0.28 ≈ $12,282, or ~$147,000/year. Buyers shopping by headline P+I alone routinely qualify on paper for homes whose PITI fails the lender’s actual underwriting.

When and why it matters

PITI is what your bank account actually sees each month, and what underwriters use to decide whether to lend. The discrepancy between “mortgage payment” in listing photos and the real PITI is the single largest source of first-year buyer regret — many buyers don’t budget for the tax-and-insurance escrow at all and are surprised when the monthly draft is 25-40% higher than the P+I they planned around. Refinancing decisions also turn on PITI not P+I: a refinance that cuts interest by 0.5% might save $150/month on P+I, but if it resets escrow and the new property-tax assessment kicks in, the net PITI may be flat or higher. When comparing offers, ask for the full PITI from each lender on the Loan Estimate (page 1, “Estimated Total Monthly Payment”) and compare those numbers — they’re the only directly comparable figure. Reference: Fannie Mae — Ability to Repay / Qualified Mortgage.