The term 'PITI' stands for...

The term 'PITI' refers specifically to Principal, Interest, Taxes, and Insurance, which are the four main components of a monthly mortgage payment. Understanding PITI is crucial for both lenders and borrowers as it provides a comprehensive picture of the total housing costs associated with a mortgage.

Principal is the amount borrowed that must be repaid, while interest is the cost of borrowing that principal. Taxes typically include property taxes that the homeowner is responsible for, which can fluctuate but are usually assessed annually. Insurance generally refers to homeowners insurance, which protects the dwelling and personal property against damages and liability.

Recognizing PITI helps potential homeowners budget effectively and ensure they can meet their financial obligations. By comprehending all four elements, borrowers can have a clearer understanding of how much they will need to pay each month, which influences decisions about affordability and long-term financial planning.