Finance
A Pennsylvania borrower's PITI payment includes what four components?
APurchase price, interest, title insurance, inspection
BPrincipal, interest, taxes, and insurance✓ Correct
CPayment, income, taxes, and insurance
DPrincipal, income, title, and interest
Explanation
PITI stands for Principal (loan paydown), Interest (cost of borrowing), Taxes (property tax escrow), and Insurance (homeowner's insurance escrow and PMI if applicable). Lenders analyze PITI as the total monthly housing cost for debt-to-income ratio qualification purposes.
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Key Terms to Know
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.
Title InsuranceInsurance protecting against financial loss from defects in a property's title that existed before closing but were unknown at the time of purchase.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
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.
Math Concepts
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