The five parts
PITIA is an acronym for the full monthly cost of owning the property with a loan on it.
- Principal: the portion of the payment that reduces your balance
- Interest: the cost of the money, set by your rate
- Taxes: property taxes, divided into a monthly amount
- Insurance: hazard, and flood or wind where required
- Association dues: HOA or condo fees, if the property has them
Why all five count
A lender is asking whether the property can carry itself. A tenant's rent has to cover everything the property owes each month, not only the mortgage. If taxes are high or the HOA charges $300, that is real money leaving the account whether or not the loan is paid.
This is why two properties with the same price and the same rent can get different answers. A $2,100 principal and interest payment with $200 in taxes is a different loan from the same payment with $600 in taxes and $250 in dues.
Which parts you can actually move
You have more control than it looks.
- Principal and interest: a larger down payment lowers both, and an interest-only period removes the principal portion for a time
- Taxes: check the post-sale assessed value and appeal an inflated assessment where the process allows
- Insurance: shop it. Premiums for the same property vary widely between carriers
- Association dues: these are fixed, so treat them as a filter when you pick a property
The interest-only question
Interest-only payments raise your ratio because the principal portion disappears for the interest-only period. That can turn a 0.95 into a 1.10. It is a legitimate tool, and it is also a trade. You are not paying the balance down during that period, and the payment steps up when the period ends.
Use it when the plan is a sale or a refinance before the step-up, or when the extra cash flow goes to work somewhere that earns more than the principal would have saved.
This article is general information and not financial, tax, or legal advice. Loan terms vary by lender and change over time.