Mortgage 101 – Understanding PITI and Monthly Home Loan Payments

If you’re hoping to become an Orem homeowner, you’ve likely done some research on mortgage loans. You may have looked at home prices in northern Utah, too, and you’re probably trying to figure out how much money you can afford to borrow.

During your mortgage fact-finding mission, PITI is a term that may have popped up – and it’s one you need to understand. The acronym, which stands for principal, interest, taxes and insurance, represents the four elements of a home loan payment. Here’s what you need to know about each part of PITI and the other mortgage-related monthly costs you might incur when you buy a home.

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The principal of a home loan is the actual amount of money borrowed. To calculate your initial mortgage principal, simply take the final price of the property you want to purchase and subtract the amount of your down payment.


You can look at interest as a fee paid to a mortgage lender for the privilege of borrowing their money to buy a home. With an adjustable-rate loan, interest rates can fluctuate, but with a fixed-rate mortgage, the rate never changes.


Every Orem homeowner has property tax obligations, and the amount is based on home value. The tax portion of your mortgage payment will go into an escrow account, then on to the local government at the proper time.


Although homeowners insurance isn’t required by law in the state of Utah, most mortgage lenders make it mandatory, as a condition of obtaining a home loan. Like property taxes, insurance payments go into escrow until they become due.

Additional Mortgage-Related Monthly Expenses

As you can see, PITI matters. If you only take the mortgage principal and interest rate into account and fail to consider taxes and homeowners insurance, you won’t have the full picture of what your monthly home loan payments will entail.

That said, PITI isn’t all that matters when you’re budgeting to buy a home. Depending on your specific circumstances, you might face the following costs each month:

Private Mortgage Insurance

If you go with a conventional mortgage and make a down payment of less than 20 percent, private mortgage insurance (PMI) is typically required. The policy is designed to protect the lender, and the amount charged each month may be anywhere between .5 and 2 percent of the loan principal.

Homeowners Association Fees

If the Orem home you want to buy is located in a subdivision or private development, membership in the community homeowners association might be a requirement of making the purchase. In that case, you might be expected to pay the HOA a few hundred dollars each month.

Have questions about PITI? Or are you ready to explore your home loan options?

The professional team at Intercap Lending has decades of mortgage industry experience, and we’re here to meet your needs. For expert answers, advice and information on mortgages and buying a home in Orem, Utah, contact us today.