What Is PITI?

PITI stands for Principal, Interest, Taxes, and Insurance, and represents the full monthly housing payment that lenders evaluate when determining mortgage affordability. Each component serves a distinct purpose. Principal is the portion of your payment that reduces the outstanding loan balance. Interest is the cost charged by the lender for borrowing the money. Taxes refer to property taxes, which are collected monthly by the lender and held in escrow until the annual tax bill is due. Insurance includes homeowners insurance and, if applicable, private mortgage insurance (PMI) for borrowers who put down less than 20%.

Lenders use PITI to calculate two key affordability ratios. The front-end ratio (also called the housing ratio) divides your monthly PITI by your gross monthly income; most conventional lenders prefer this to stay below 28%. The back-end ratio (debt-to-income ratio or DTI) adds all monthly debt obligations to PITI and divides by gross income; most lenders prefer a back-end DTI below 43%, though FHA loans allow up to 57% in some cases.

Understanding PITI is important because buyers often focus solely on purchase price or even just the principal and interest portion of a payment when estimating affordability. Property taxes and insurance can add hundreds of dollars per month to the actual payment. In high-tax states or areas with elevated insurance premiums (such as coastal or wildfire-prone regions), the T and I portions of PITI can add 30% to 50% to the principal-and-interest payment.

For condominiums and HOA communities, lenders sometimes calculate PITIA — adding HOA dues as a fifth component — when evaluating affordability, since these recurring costs affect the borrower's overall housing expense.

Many first-time buyers are surprised when their actual monthly payment is significantly higher than the figure quoted by a mortgage calculator that only shows principal and interest. Budgeting on incomplete numbers can stretch finances dangerously thin or result in a denied mortgage application when lenders calculate the full PITI ratio.

A mortgage professional or financial advisor can help you calculate your true PITI accurately for any property you are considering, stress-test your budget against potential tax or insurance increases, and identify loan products that optimize the components you can control. Getting this number right before making an offer prevents costly surprises at closing and over the life of the loan.