PITI stands for principal, interest, taxes, and what other component?

PITI stands for principal, interest, taxes, and insurance. This acronym is commonly used in the real estate and mortgage industries to summarize the four essential components that make up a monthly mortgage payment.

Understanding PITI is crucial for budgeting purposes when purchasing a home. The principal and interest are the core elements of the loan repayment, while taxes refer to property taxes that homeowners need to pay, often included in the mortgage payment through an escrow account. The final component, insurance, typically encompasses homeowners insurance, which provides protection against damage to the home and possessions. In some cases, mortgage insurance may also be included for loans with less than a 20% down payment.

The other options do not encapsulate the fundamental aspects of PITI. Fees could refer to various costs related to the mortgage process but they are not a standard part of the basic components of a mortgage payment. Investments relate to a different financial topic, and interest rates, while important in determining the cost of borrowing, do not represent a separate component of the mortgage payment structure as PITI outlines. Therefore, C is the correct choice because it accurately completes the definition of PITI.