Your Guide To Understanding PITI Requirements

Securing a mortgage is not for the financially ill-prepared. In addition to a down payment and closing costs, you’ll need PITI reserves in place, and this amount varies according to the type of loan.

How do you know how much you will need in PITI reserves to qualify for a mortgage? We have your answers! Read on for a brief overview, and don’t worry – if you have any questions, our experienced loan professionals are always standing by to help.

PITI Requirements for Conventional Loans

When you’re applying for a conventional loan for a primary single-family residence, most lenders require borrowers to have at least two months of PITI reserves. Of course, not all transactions are that simple. Here are additional PITI reserve requirements for other common mortgage scenarios:

• Primary or investment properties with 2-4 units: six months of PITI reserves
• Borrower-owned investment properties: two months of PITI reserves per property for up to six properties, or eight months of reserves for 7-10 properties
• Second-home purchases: two months of reserves
• Cash-out refinance transactions with a DTI over 45%: six months of reserves

PITI Requirements for FHA Loans

The FHA does not specify a PITI reserve requirement for primary single-family residences, but properties with 3-4 units require three months of reserves. Manually-underwritten loans for primary properties follow these guidelines:

• Properties with 1-2 units and up to a 45% DTI require one month of PITI reserves. The same property types with up to a 50% DTI require two months of PITI reserves.
• Properties with 3-4 units require three months of reserves.

When you’re applying for an FHA loan, you might have a financial condition that has made mortgage approval a challenge. If so, you might be able to use the extra PITI reserve amounts listed here as a compensating factor to qualify:

• Three months of reserves to purchase a primary property with 1-2 units.
• Six months of reserves to purchase a primary property with 3-4 units.

At MortgageDepot, we are experts in understanding PITI requirements. Contact us today to learn how to use PITI to your advantage at the mortgage desk!

Connect with one of our loan consultants to learn more.