When you talk to a lender about a mortgage, plenty of acronyms are thrown around and it can be challenging to keep up. If you don’t work in the industry (and sometimes if you do) it can seem impossibly vague like trying to communicate in a foreign language.
When you are trying to get a handle on what your estimated monthly payment will be and you see “P&I”, “PITI” and “PITIA” all listed as payment amounts, it’s easy to feel lost without a clear explanation. With that in mind, let’s get right to it so that you can know more and stress less!
First, I always like to stress that your estimated monthly payments are just that … ESTIMATES. Mortgage professionals do our best to make sure the estimates you receive are as accurate as possible, but until we receive your actual homeowner’s insurance bill and property tax bill knowing your actual payment amount is impossible.
When lenders refer to your P&I payment, this is the amount of your monthly payment comprised of the principal and interest. Where the PITI payment is listed, we have added a “T” for Taxes. Depending on where you live, this can include property tax or any other taxes charged based on the value of your property charged by your state, county, or locality. The extra “I” we added is for Insurance. The insurance charged includes your homeowner’s (or hazard) insurance and monthly mortgage insurance premiums, if applicable. A “PITIA” payment includes all of the above and adds in an “A” for association dues. Again, this fee is not applicable to all mortgages but if your home is subject to homeowner’s association or other “Association” dues they would be included in this monthly payment estimate.
In summary:
P – Principal
I – Interest
T – Taxes
I – Insurance
A – Association Fees/Dues
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