PITI

Principal, Interest, Taxes, Insurance — the four components of a typical mortgage payment.

PITI is what lenders use to determine if you can afford a mortgage. Principal + interest is the loan amortization. Taxes are 1/12 of annual property tax, escrowed monthly. Insurance is 1/12 of annual homeowners or landlord insurance. Investor implication: when you see a mortgage rate quote of $X/month, that's usually just P+I. Add taxes and insurance to get the real cash outflow. On a $300k loan at 7% over 30 years, P+I is $1,996; add $4,200 annual taxes + $1,500 insurance and PITI is $2,471. The $475 gap matters for cashflow underwriting.