Frequently Asked Questions
Everything you need to know about PITI mortgages, PMI, and using our calculator.
What does PITI stand for in a mortgage?
PITI stands for Principal, Interest, Taxes, and Insurance. These are the four main components of a monthly mortgage payment. Principal and Interest make up the loan repayment portion, while Taxes refer to property taxes and Insurance includes homeowners insurance and, if applicable, private mortgage insurance (PMI) and HOA dues.
How is PITI calculated?
PITI is calculated by adding four components: (1) Principal & Interest using the standard amortization formula M = P[r(1+r)^n]/[(1+r)^n-1], (2) monthly property taxes (annual taxes ÷ 12), (3) monthly homeowners insurance (annual premium ÷ 12), and (4) PMI if your down payment is less than 20%.
What is PMI and when do I need it?
Private Mortgage Insurance (PMI) is typically required when your down payment is less than 20% of the home price. It protects the lender, not you. PMI usually costs between 0.3% and 1.5% of the original loan amount annually. Once your loan-to-value ratio reaches 80%, you can request to have PMI removed.
How much down payment do I need?
While conventional loans often require 5-20% down, FHA loans may accept as little as 3.5%, and VA/USDA loans can require 0% down for eligible borrowers. A 20% down payment eliminates PMI, reducing your monthly PITI significantly.
Does PITI include HOA fees?
PITI traditionally includes Principal, Interest, Taxes, and Insurance. HOA fees are a separate cost but should be considered when calculating total housing costs. Our calculator includes HOA as an optional fifth component for a complete monthly housing payment view.
What is a good PITI ratio?
Lenders typically want your PITI to be no more than 28% of your gross monthly income (front-end ratio), and your total debt payments (including PITI) to be no more than 36% (back-end ratio). Some lenders allow up to 43% for qualified borrowers.
How do property taxes affect my mortgage?
Property taxes are usually escrowed by your lender, meaning a portion is collected each month with your mortgage payment and held in an escrow account until tax bills are due. This means your monthly PITI includes 1/12 of your annual property tax bill.
Can I lower my PITI payment?
Yes. You can lower PITI by making a larger down payment (eliminates PMI), choosing a longer loan term (lower P&I but more interest), improving your credit score (lower rate), shopping for cheaper insurance, or buying in an area with lower property taxes.