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PITI represents the total monthly mortgage payment that borrowers must make, encompassing four essential components that together constitute the complete housing payment obligation. This acronym helps borrowers and lenders understand the full monthly cost of homeownership beyond just the loan payment. The Principal component represents the portion of each payment that reduces the outstanding loan balance. Early in the loan term, principal payments are relatively small, but they gradually increase over time as the loan amortizes. The Interest component represents the cost of borrowing, calculated on the outstanding principal balance. Early payments are primarily interest, with the interest portion decreasing as the principal balance declines. Taxes refers to property taxes assessed by local governments, which are typically collected monthly through an escrow account and paid annually or semi-annually to the taxing authority. Insurance refers to homeowners insurance, which protects the property and lender against property damage, liability, and other risks. Like property taxes, homeowners insurance is typically escrowed and paid annually, with monthly contributions held in escrow.

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PITIA

PITIA extends PITI by adding Association fees, commonly known as HOA (Homeowners Association) dues or condominium fees. These fees cover shared expenses for properties in planned communities, condominiums, or cooperatives, such as maintenance of common areas, amenities, building insurance, and reserve funds. PITIA represents the complete monthly housing payment obligation and is the figure used in debt-to-income (DTI) ratio calculations, as it reflects the borrower’s total monthly housing cost.

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Why PITIA matters

PITIA is a critical metric in mortgage underwriting because it represents the borrower’s complete monthly housing obligation. Beyond its use in DTI calculations, PITIA is also used to determine reserve requirements for many loan programs.

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Reserve requirements based on PITIA

Many loan programs require borrowers to maintain reserves (liquid assets that remain after closing) as a multiple of PITIA. These requirements vary by:
  • Loan program - Different programs have different reserve requirements
  • Property type - Primary residence, second home, and investment properties have different requirements
  • Loan amount - Higher loan amounts often require more months of reserves
  • Number of properties - Additional financed properties may require additional reserves
Examples:
  • Some jumbo loan programs require 6-24 months of PITIA in reserves, depending on loan amount
  • FHA loans require 3 months of PITIA for 3-4 unit properties
  • Investment property loans may require 6 months of PITIA per property
Reserves provide a safety cushion, ensuring borrowers can continue making mortgage payments even if they experience temporary income loss or unexpected expenses. See the Reserves page for more details on how reserve requirements work.