PITI
By Jude Wallis
PITI is a housing payment split into four parts: principal, interest, property taxes and homeowners insurance. The first two go to the lender, the last two are collected to pay bills when due.
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Principal and interest are the loan. Taxes and insurance are not: they are annual bills divided by twelve and held in an impound account until the county and the insurer are paid. That money never reduces the balance owed, which is why a payment that grows because taxes rose has not made the mortgage larger.
Underwriting works on the whole four-part figure, not on principal and interest alone. A shopper who compares houses on principal and interest is comparing loans while the tax bill quietly decides which house is affordable.
Mortgage insurance and association dues stack on top of PITI without belonging to it. The PITI calculator assembles the four parts, how PITI works is the explainer, and escrow is the account holding the last two.