PITI

PITI is an acronym for the four components of a monthly mortgage payment: (1) P — Principal: the portion of your payment that reduces your loan balance; in the early years of a mortgage, this is the smallest component — amortization front-loads interest; (2) I — Interest: the cost of borrowing — calculated as the monthly periodic rate times the remaining balance; (3) T — Taxes: your estimated annual property tax divided by 12, collected monthly and held in escrow until the tax bill is due; (4) I — Insurance: homeowner's insurance premium (and mortgage insurance if applicable — PMI or MIP), collected monthly and held in escrow. Together, these four components represent your actual monthly housing cost to the lender. The CFPB homebuyer guide explains PITI in the context of understanding your payment.

Lenders use PITI to calculate your housing expense ratio — also called the front-end debt-to-income (DTI) ratio. The formula: PITI ÷ gross monthly income. Conventional loan maximum front-end DTI: typically 28–36% (though Fannie Mae DU may allow higher for strong borrowers). FHA maximum front-end DTI: 31% (though FHA may allow up to 40%+ with compensating factors). USDA: 29% front-end limit. VA: no specific front-end limit, but total back-end DTI of 41% is a guideline. Example: gross monthly income = $8,000. Maximum PITI at 36%: $2,880/month. If your PITI exceeds the limit, you either need a higher income, a lower purchase price, or a larger down payment to reduce the P+I component. Use the mortgage calculator to model your PITI at different purchase prices and rates.

Standard PITI does not include HOA fees — but lenders do count HOA fees in your total housing expense and back-end DTI ratio. Some lenders use the term "PITIA" (adding A for Association dues) to reflect this. In Canada, 50% of condo fees are included in the GDS ratio calculation. For Fannie Mae and Freddie Mac conventional loans, the full monthly HOA fee is added to your back-end DTI (total monthly debt obligations ÷ gross income). For FHA loans, monthly HOA fees are also counted. When budgeting for a condo or planned community with HOA fees, calculate your full PITIA to understand your true qualifying constraints. A high HOA fee on a condo ($500–$1,000/month) can significantly reduce your qualifying purchase price compared to a freehold home with no association fees. See the HOA fee glossary entry.

In the US, most lenders require an escrow account where you pay 1/12 of your estimated annual property tax with each monthly mortgage payment. The servicer holds these funds and pays the property tax bill when it comes due (typically annually or semi-annually). If your property tax increases, your monthly escrow payment increases — causing a payment increase even if your rate is fixed. If the escrow account runs short (underfunded), the servicer issues an escrow shortage notice and may raise your monthly payment to cover the shortfall and replenish the account. In Canada, property taxes can be paid directly to the municipality or collected by the lender through the mortgage payment — practice varies by province and lender. See the property taxes and escrow guide for detailed escrow mechanics.

The "I" for Insurance in PITI includes: (1) Homeowner's insurance (HO-3 or equivalent): mandatory for all mortgaged properties; covers dwelling, personal property, and liability; typically 0.5–1.5% of home value annually depending on location, age, and coverage; (2) Private Mortgage Insurance (PMI): required on conventional loans with less than 20% down; 0.2–1.5% annually depending on LTV and credit score; (3) FHA MIP (Mortgage Insurance Premium): required on all FHA loans; 0.45–1.05% annually; (4) Flood insurance: required by FEMA if the property is in a designated Special Flood Hazard Area (SFHZ); (5) In some areas, wind or earthquake insurance may be required by the lender. Lenders collect insurance premiums monthly and pay them from the escrow account. See the PMI glossary entry and PMI guide for mortgage insurance details.

In Canada, the equivalent calculation uses the term PITH — Principal, Interest, Taxes, and Heating costs — for the Gross Debt Service (GDS) ratio. Key differences: (1) Heating replaces Insurance as the fourth component in OSFI's GDS formula (insurance is not universally collected through escrow in Canada); (2) Condo fees (50%) are added to GDS for condo properties; (3) GDS limit: maximum 39% under OSFI B-20 stress test guidelines; (4) Escrow: in Canada, property taxes are not always collected by the lender — some borrowers pay directly to the municipality; lender policy varies. The CMHC and OSFI stress test qualifying rate (higher of contract rate +2% or 5.25%) applies to both the GDS and TDS ratios. See the stress test glossary entry for Canadian qualification details.