1. What is PITI?

PITI stands for Principal, Interest, Taxes, and Insurance - the four components of a typical mortgage payment. Understanding PITI helps borrowers estimate their total monthly housing costs.

2. How PITI is Calculated

The PITI calculation uses the following formula:

Where:

• \( PMT (PI) \) — Monthly principal and interest payment
• \( Taxes \) — Annual property tax amount
• \( Insurance \) — Annual homeowners insurance premium

Explanation: The principal and interest portion is calculated using standard amortization formulas, while taxes and insurance are simply divided by 12 for the monthly amounts.

3. Importance of PITI Calculation

Details: Lenders use PITI to determine mortgage qualification (typically requiring PITI to be ≤28% of gross monthly income). Borrowers need PITI to budget accurately for homeownership costs.

4. Using the Calculator

Tips: Enter the loan amount, interest rate, loan term in years, and annual amounts for taxes and insurance. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's included in PITI?
A: PITI includes principal, interest, property taxes, and homeowners insurance. It may also include mortgage insurance (PMI) if applicable.

Q2: How does PITI affect loan approval?
A: Lenders compare PITI to your income (front-end ratio) and total debt payments (back-end ratio) to determine affordability.

Q3: Can PITI change over time?
A: Yes, taxes and insurance premiums often increase. Adjustable-rate mortgages may also see PI changes at rate adjustment periods.

Q4: What's not included in PITI?
A: PITI doesn't include HOA fees, utilities, maintenance costs, or any other housing-related expenses.

Q5: How accurate is this calculator?
A: This provides a good estimate, but actual payments may vary based on exact loan terms, tax assessments, and insurance rates.