Finance
A borrower's monthly payment includes PITI. What does the 'I' for insurance refer to?
AInterest only
BHazard insurance premiums escrowed by the lender✓ Correct
CTitle insurance
DIncome protection insurance
Explanation
PITI stands for Principal, Interest, Taxes, and Insurance. The 'I' for insurance refers to the homeowner's hazard (property) insurance premium, often escrowed and paid by the lender.
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Key Terms to Know
Title Insurance
Insurance protecting against financial loss from defects in a property's title that existed before closing but were unknown at the time of purchase.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
EscrowA neutral third-party arrangement where funds, documents, and instructions are held until all conditions of a real estate transaction are satisfied.
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