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What are PITI Reserves?

What are PITI Reserves?

What are PITI Reserves?

Mortgage payments are made up of four components these include the following Principal, Interest, Taxes and Insurance. Some lenders require 2-3 months PITI reserves in order for your loan to be qualified. PITI reserves are several month cash reserves required by lender that borrowers must have at hand when closing on a mortgage loan. PITI stands for principal, interest, taxes and insurance.

A 6-month PITI reserve is not as common as 2-3 month PITI reserves for owner occupied properties.  Also, seasoning is also expected – that is, the funds can’t show a history of several days but need to have been in existence for at least several months. Stocks and bonds, 401k and IRAs also qualify as PITI funds on reserve.

Be very careful when comparing monthly mortgage payments. Ask to see the payments in writing from each mortgage professional that provides you a quote. This way you can compare PITI payments with everything right in front of you so that there is no confusion. Sometimes, one lender may quote you a payment and even have a homeowners association due worked into your monthly PITI payment and another lender may not.

Some borrowers may not wish to have their payment include PITI. when shopping a mortgage loan, it is advised that the borrower maintain a sound understanding of the monthly costs of taxes and insurance, and look only at the principal and interest of the payment. This will avoid confusion between you and your loan officer or mortgage broker with respect to what you are actually paying on a monthly basis for your mortgage.

Hoped this helped, if you need any more answers feel free to Contact Us again

-Walter Grande

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