PITI Payments

Your monthly mortgage payment is also called your PITI payment which stands for the four components of your payment:

After you get a mortgage, you will pay back your principal and interest over years. In most cases, insurance and property taxes are also required and combined with your principal and interest payment. The taxes and insurance premiums are placed into an escrow account and paid by the lender.

Property Taxes

Real estate purchases are subject to taxes by the state and city government. Mortgage lenders often collect annual taxes as a monthly addition to your payment, which is deposited into an escrow account and used to pay your property taxes each year.

Your property taxes depend on the tax rates in your area. This can vary wildly, and it may account for a small or large share of your PITI payment.

Homeowners Mortgage Insurance

Finally, your lender will want to ensure your home is covered by insurance. This is important because, otherwise, you and the lender may suffer a total loss that is not recovered or you may choose to default on the loan if the home suffers serious damage. You may also need other forms of insurance including mortgage insurance or flood insurance. All forms of insurance may be included in your PITI payment.