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| Principal, Interest, Taxes, Insurance - PITI |
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The components of a mortgage payment. Principal is the money used to pay down the balance of the loan; interest is the charge you pay to the lender for the privilege of borrowing the money; taxes refer to the property taxes you pay as a homeowner and insurance refers to both your property insurance and your private mortgage insurance.
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PITI is typically quoted on a monthly basis and compared to a borrower's monthly gross income by means of computing the individual's front-end and back-end ratios, which are used to approve mortgage loans. Generally, mortgage lenders prefer PITI to be equal to, or less than 28%, of a borrower's gross monthly income.
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