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Have you been looking at homes on the market and have come across the acronym PITI? What does this mean? P stands for principal, I stands for interest, T stands for taxes, and I stands for insurance. Understanding this acronym is vital to the importance on the house you are able to comfortably afford.

(P) Principal; the amount borrowed from a lender while making your home purchase. What you borrow is the amount that needs to be paid back in monthly installments best known as mortgage. If you’re able to afford a large down payment on your home the principal goes down accordingly. It is essential to have a ballpark of how much you can realistically afford to pay back to a lender.

(I) Interest; the amount that a lender charges for the privilege of borrowing money for the purchase of your home. Interest is calculated as a percentage of the outstanding principal. At first the largest part of mortgage payments will go toward paying interest, but as time goes by more of the mortgage payment will be applied to the principal instead.

(T) Taxes; part of the monthly mortgage payment includes taxes for the communities roads, schools, and other municipal services. Real estate taxes are part of the home ownership, and depending on the area you live in the taxes are different. Always be sure to check out the local tax rate of any considerable areas you’re looking to purchase in.

(I) Insurance; homeowners with a mortgage are required to carry a homeowners insurance policy to protect their investment. Homes that are purchased with less than 20% down payment may be required to carry (PMI) private mortgage insurance.


Jamie Lou

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