Finance
What does 'PITI' stand for in mortgage payment calculations?
APrincipal, Interest, Taxes, Insurance✓ Correct
BPayment, Interest, Title, Insurance
CPrincipal, Income, Taxes, Investment
DProperty, Interest, Taxes, Investment
Explanation
PITI stands for Principal, Interest, Taxes, and Insurance — the four components of a typical monthly mortgage payment that includes principal repayment, interest, property taxes (escrowed), and homeowner's insurance (escrowed).
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Key Terms to Know
Escrow
A neutral third-party arrangement where funds, documents, and instructions are held until all conditions of a real estate transaction are satisfied.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
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.
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