What does the acronym PITI stand for in mortgage payments?

The acronym PITI stands for Principal, Interest, Taxes, and Insurance, which are the four key components that make up a standard mortgage payment. When a borrower makes monthly payments on a mortgage, they are typically paying back the loan amount (principal) and the interest charged on that loan. Additionally, many lenders require borrowers to also include property taxes and homeowners insurance as part of their monthly mortgage payment, ensuring that these critical costs are accounted for.

Understanding PITI is essential for anyone considering a mortgage, as it provides a comprehensive view of the total monthly financial obligation associated with homeownership. This knowledge helps potential buyers in budgeting and managing their finances effectively since forgetting any of these components can lead to financial strain. The other choices do not accurately represent the components that make up a mortgage payment, which distinguishes the correct answer clearly.