Ignite FB Tracking PixelPITI: What it is & why it matters - Georgina Patterson
Keller Williams Realty Petaluma, DRE #02104684
Georgina Patterson, Keller Williams Realty Petaluma, DRE #02104684Phone: (415) 342-6794
Email: [email protected]

PITI: What it is & why it matters

by Georgina Patterson 02/21/2022

PITI, which is short for "principal, interest, taxes and insurance," is an essential term to know for anybody seeking a mortgage loan. The acronym refers to the relationship between these four numbers expressed in a ratio and can tell lenders about your financial status. Here is a breakdown of the term and why it matters to potential homeowners and borrowers:

Basic definitions

Principal

The principal is the amount of a loan before adding any interest. When you make a down payment on a mortgage or loan, the amount is deducted from the principal. For example, if you make a 20% down payment on a $250,000 mortgage toward the principal, the remaining principal amount would be $200,000.

Interest

Interest rates are based on a percentage and represent the amount of money you will pay in addition to your principal amount. Interest rates are considered a fee for borrowing the money, as they go back to the lender as profit. The percentage may remain the same throughout the life of the loan, but the amount you pay will gradually decrease as the principal amount decreases.

Taxes

Property taxes support your local community and pay for things like emergency services, infrastructure maintenance and public schools. Property tax amounts vary from one location to another and can also change from year to year. To find out how much your property taxes are every year, you can find the value of your home through a professional appraisal.

Insurance

Homeowners insurance is not always required by mortgage lenders, but proof of coverage is a common condition of your loan. Insurance rates vary both by location and provider.

Why does PITI matter?

Knowing your PITI means knowing how large of a mortgage you can afford. It also means having a more in-depth awareness of your financial situation, making it possible to find the best opportunities and homes in your price range. Remember these key terms and keep them in mind when considering mortgage options and your home search.

About the Author
Author

Georgina Patterson

Georgina was born and raised in Paris, France. She studied Mathematics and Biology at the University of Paris. She settled in Marin County where she and her husband raised their two children. She was on tour with Cirque du Soleil, managing and chaperoning her young daughter who was one of the show's featured performers. During this time, they worked and traveled throughout Canada and the USA. Georgina appreciates the beauty of the Bay Area and Sonoma. She especially enjoys the nice weather, diversity, and culture. She became a tax preparer and an Enrolled Agent. She decided to become a Realtor® and is pleased to join Keller Williams Realty. For fun, she enjoys traveling and playing the Piano. 

Realtor®

DRE #02104684

415.342.6794

[email protected]