What Is PITI?
PITI stands for Principal, Interest, Taxes, and Insurance — the four components that make up your total monthly mortgage payment. Lenders use your PITI payment to calculate your housing-expense ratio and determine how much you can borrow.
Breaking Down PITI
Principal
The portion of your payment that reduces your actual loan balance. In early payments, this is a small share — it grows each month as your balance decreases.
On a $400K loan at 7% / 30 years: Month 1 principal ≈ $330. Month 360 principal ≈ $2,280.
Interest
The lender's fee for borrowing money. Calculated as your remaining balance × monthly rate. Interest dominates early payments and decreases over time.
Month 1: ~$2,333 interest. Month 360: ~$16 interest. Total interest over 30 years: ~$559,000.
Taxes
Property taxes assessed by your local government, typically escrowed monthly by your lender. Rates vary widely by state — from 0.3% in Hawaii to 2.4%+ in New Jersey.
On a $400K home at 1.1% tax rate: $4,400/year or ~$367/month in escrow.
Insurance
Homeowner's insurance protects against fire, theft, and damage. PMI (private mortgage insurance) is added when your down payment is under 20%. Both are typically escrowed.
Average homeowner's insurance: ~$1,400/year ($117/month). PMI: 0.5–1.5% of loan annually.
PITI and the 28% Rule
Lenders use your PITI payment to calculate your front-end DTI ratio: PITI ÷ gross monthly income. The standard guideline is to keep this under 28%. If your PITI exceeds 28% of income, lenders may require compensating factors (strong credit, large reserves) or deny the loan.
Example: $80,000 income
Monthly income: $6,667 × 28% = $1,867 max PITI
On a $280K home at 7% / 30yr + taxes + insurance, PITI ≈ $1,840 — just under the limit.