PITI stands for principal, interest, taxes, and insurance, the four parts that make up a typical monthly mortgage payment. Understanding it helps buyers grasp the true monthly cost of owning a home beyond just the loan itself.
Principal is the portion that pays down the loan balance, and interest is the cost of borrowing. Taxes refers to property taxes and insurance to homeowners insurance, both often collected by the lender and held in an escrow account to be paid on the owner's behalf.
Lenders look at PITI when calculating a borrower's debt-to-income ratio and how much they can afford. If a home has HOA dues or private mortgage insurance, those add to the monthly obligation on top of PITI.