If you're selling or buying a piece of real property, there are many terms that you should know. There are hundreds of these special terms and it's not feasible for the average buyer or seller to learn all of them. However, there are some words and abbreviations that you should be familiar with for your own benefit and the PITI acronym is one. Following is an explanation of the term and what each letter represents.

P Stands for Principal
In lending terms, the "principal" is the actual amount of money that you are borrowing in order to buy the piece of property. This figure varies all the time at the same home price based on how much you put down on the home and how much you actually borrow. The principal is usually the largest part of the PITI figure.

I Stands for Interest
Whenever you borrow money from a lender, you are charged interest. This is the amount the lender gets from you in order to loan you what you need, based on the cost of keeping the money from working anywhere else. It is expressed in percentages but shown as an amount on your statement. Depending on the terms you agree on, the interest rate can stay at a constant percentage of the loaned amount for the entire term of the loan or it can be variable, meaning it can be subject to adjustment based on certain standard factors.

T Stands for Taxes
Taxes are one of the things you can depend on in life, and we are all acquainted with that fact. Taxes on real estate typically go to government jurisdictions at the local level like the county or city to pay for the local public services. When you purchase a home, those tax dollars help local schools, recreation centers, hospitals and other facilities serve the residents. The taxes are usually included with your monthly mortgage payment prorated. The lender pays the tax to the appropriate taxing agency.

The Other I Stands for Insurance
You don't want to have a home without insurance, and if you are buying with someone else's money whoever lends it to you will insist that you are insured. Your home is your biggest investment and a home insurance policy is vital to avoid sleepless nights of worry. Depending on what your home is worth and where you live, there are many kinds of policies that you can decide on, which will be the topic of another article. The choices that may be available to you will also vary based on how large a down payment you make on the home. If you make a down payment of less than 20% percent, lenders will require you to carry a certain kind of policy that covers them so they will get their money back if something happens to your home or if you the home is lost in foreclosure. Similar to taxes, these payments are generally put together with your monthly payment as well.

Information provided by AutomatedHomefinder.com, Colorado's best Boulder Real Estate experts.