What Is PITI in Real Estate?

PITI stands for Principal, Interest, Taxes, and Insurance. These four components make up a homeowner’s total monthly mortgage payment. Lenders use PITI to determine mortgage affordability and loan approval.

✅ What PITI Includes

PITI combines four essential cost components into one monthly housing payment:

  • Principal: The amount that reduces the loan balance.
  • Interest: The cost of borrowing money from the lender.
  • Taxes: Property taxes, typically collected through escrow.
  • Insurance: Homeowners insurance (and possibly mortgage insurance).

Some loans also include PMI or MIP as part of the insurance portion.

📊 Why PITI Matters

Lenders rely on PITI to determine whether a borrower can comfortably afford a mortgage. It affects:

  • Debt-to-Income Ratio (DTI): PITI is used in front-end and back-end calculations.
  • Loan approval: Lower PITI = higher likelihood of qualifying.
  • Monthly affordability: Helps predict your true monthly housing cost.
  • Budget planning: Prevents unexpected expenses after closing.

PITI gives a more accurate picture than principal and interest alone.

💡 How Lenders Use PITI

When evaluating a mortgage application, lenders analyze PITI to ensure that:

  • The payment fits within acceptable DTI ratios.
  • The borrower has sufficient income to handle long-term payments.
  • The loan structure aligns with program requirements (FHA, VA, Conventional).

PITI helps lenders assess overall financial risk and protect borrowers from payment shock.

🏡 PITI & FSBO Transactions

FSBO sellers benefit from understanding PITI because it influences buyer affordability. Buyers with a high PITI relative to income may struggle to qualify or face delays in financing.

When reviewing offers, understanding PITI helps sellers assess whether a buyer’s financing is solid and likely to close on time.

See more mortgage basics in the Mortgage Guide.

Explore more real estate definitions and MLS guides in our What Is category.