Legal Definitions - PITI

Definition: PITI is an abbreviation for the four major expenses that make up a mortgage payment: principal, interest, taxes, and insurance. These expenses are combined to determine the total amount of the mortgage payment, which is usually quoted on a monthly basis. PITI is an important factor in determining the affordability of a mortgage, and lenders generally prefer it to be equal to or less than 28% of a borrower's gross monthly income.

Example: Let's say you take out a mortgage to buy a house. Your monthly mortgage payment is $1,500. Of that amount, $1,000 goes towards paying off the principal and interest on the loan, while the remaining $500 covers property taxes and homeowners' insurance. This $500 is the PITI portion of your mortgage payment.

Explanation: The example illustrates how PITI is calculated as a portion of the total mortgage payment. In this case, the PITI is 33% of the total payment, which is higher than the recommended 28%. This means that the borrower may have difficulty affording the mortgage and may need to consider a lower-priced home or a larger down payment.