What is PRINCIPAL, INTEREST, TAXES, AND INSURANCE (PITI)?

The 4 components that are used to determine the mortgage installment on a property that is payable on a monthly basis. It can used in two ways: (1) Before the loan approval: Judging the borrower’s ability to payback the loan by computing the borrower’s front end and back end ratio. (2) After the loan approval: The collection of monthly installment payments. In addition, an amount totalling a twelfth of tax and insurance premium is also collected, that is kept on a standby until its due.

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