Core Insights - PITI, which stands for principal, interest, taxes, and insurance, is a crucial component of monthly mortgage payments, affecting affordability and loan eligibility [1][11] Group 1: Components of PITI - **Principal**: The principal is the remaining balance of the mortgage after the down payment. For example, a $300,000 home with a $30,000 down payment results in a principal balance of $270,000 [2] - **Interest**: Interest is charged on the principal based on the borrower's credit score. For a $270,000 loan at a 7% interest rate, the first year would incur over $17,250 in interest, with only about $2,500 applied to principal reduction [4] - **Taxes**: Property taxes are included in monthly payments and are estimated annually, with one-twelfth of the total held in escrow until due [5] - **Insurance**: Homeowners insurance premiums are also included in the payment, with a portion paid monthly into an escrow account. This amount can vary over time [7] Group 2: Additional Costs and Considerations - **Mortgage Insurance**: Depending on the down payment, borrowers may need to pay for private mortgage insurance (PMI) if the down payment is less than 20%. Other loans, like FHA and USDA loans, have their own insurance requirements [8][9][10] - **Total Monthly Payment**: For a $1,796 monthly payment on a $270,000 mortgage, including taxes, homeowners insurance, and PMI, the total can rise to $2,336 [12] - **Other Costs**: PITI does not cover additional expenses such as homeowners' association fees, utilities, maintenance, and closing costs [13] Group 3: PITI Calculation and Changes - **Calculating PITI**: The best way to calculate PITI is through a mortgage calculator that includes principal, interest, taxes, insurance, and other potential costs [14] - **Variability of PITI**: PITI can change due to adjustable-rate mortgages or fluctuations in property taxes and insurance costs [16] - **PITI Rule**: The 28% rule suggests that PITI should not exceed 28% of a borrower's gross monthly income, serving as a guideline for loan approval [17] Group 4: Strategies to Lower PITI - **Reducing PITI**: Making a larger down payment can lower PITI by reducing the principal and interest owed. Refinancing when interest rates drop can also help, but extending the loan term may increase total interest paid [18]