Buying your first home? Be prepared to learn a list of delightful new acronyms—APR, PMI, FICO, FHA, LTV and DTI, just to name a few. When it comes to establishing your home buying budget, PITI is the first term you should tackle.

What is PITI?

PITI stands for Principal, Interest, Taxes and Insurance, and calculating it can help you decide how comfortably a home’s monthly costs will fit into your future financial plans.

How to calculate PITI:

Add together these four costs to get your total monthly PITI payment:

Mortgage Principal

The part of your monthly payment that is applied to the balance of your loan (without the interest)

Home Loan Interest

The interest paid in monthly increments for the life of your loan

Monthly Property Taxes

Your monthly property tax payment (approximately 1/12 of the total property tax for the year)

Home Owners Insurance

Also called hazard insurance or homeowner’s insurance, this coverage protects your home and certain possessions, and can help protect you from liability claims or lawsuits from accidents on your property.

For more information about mortgages and the loan application process, contact our affiliate, HomeAmerican Mortgage Corporation, at 866.400.7126. You may also be interested in our First-time Homebuyer Guide, filled with tips to help you find and buy your dream home.