The four major costs that a home owner's mortgage payment covers

Lenders use PITI in two ways: (1) With most mortgage plans, the lender collects your monthly mortgage payment that covers the loan principal and interest, as well as one-twelfth of your property taxes and hazard insurance. The lender puts the taxes and insurance into a separate escrow account, and pays off these bills when they become due as a way to protect the loan. (2) Before you apply for a home loan, lenders use a ball park estimate of your expected PITI to calculate your back ratio and front ratio. Lenders use these ratios as guidelines to find out if you qualify for a loan.

See: Back ratio, Front ratio