PITI is principal, interest, taxes, and insurance.

  • Principal is the amount you borrow and you repay to the lender on a monthly schedule.
  • Interest is the percentage that the lender is charging for your loan and you repay to the lender each month. Interest is tax deductible at year end tax filings.
  • Taxes is the property taxes on your real estate property that you pay to the local government. Property taxes are tax deductible at year end tax filings. (For co-ops, your real estate tax is paid directly to the co-op board / association because the co-op pays 1 tax bill for the whole building.)
  • Insurance is the homeowners insurance you take out on your home, condo, or co-op to cover yourself from any liabilities that may occur within the confines of your home. If you put in less then 20% as down payment, the lender will require you to take out PMI (private mortgage insurance). (For co-ops, there may be a master policy that co-op shareholders have to contribute to.)

Consult with a tax professional on deducting your mortgage interest payments and property taxes because it can be a significant amount.

Also, it is important to calculate if your disposable income is able to cover the PITI amount. The lender may not know what is best for you unless you let them know your limits of how much house you can afford.

Categories: Finance

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