Glossary

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Partial Payment
A payment that is not sufficient to cover the scheduled monthly payment on a mortgage loan.

Payment Change Date
The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment adjustable-rate mortgage (GPARM). Generally, the payment change date occurs in the month immediately after the adjustment date.

Periodic Payment Cap
For an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease during any one adjustment period. See cap .

Periodic Rate Cap
For an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might be. See cap .

PITI
See principal, interest, taxes, and insurance (PITI).

Personal Property
Any property that is not classified as real estate.

PITI Reserves
A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months.

Planned Unit Development (PUD)
A thorough development plan for a large area of land. A PUD usually includes residences, roads, schools, recreational facilities, commercial, office and industrial areas. Also, a subdivision’s common areas are reserved for the use of some or all of the professional loan officers of the separately owned lots.

PMI
See mortgage insurance

Point
A "point" represents a fee collected by lenders to lower the interest rate you pay on your loan. One point equals one percent of the loan amount. That means if you borrow $100,000 and pay one point, the point equals $1,000. Points are, in effect, pre-paid interest. As a general rule, if you pay more points, the interest rate will be lower.

Power Of Attorney
A legal document that authorizes another person to act on one's behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.

Pre-Approval Apply today
A process that lets you get approved for your loan before you find a house to buy.

Prearranged Refinancing Agreement
A formal or informal arrangement between a lender and a borrower wherein the lender agrees to offer special terms (such as a reduction in the costs) for a future refinancing of a mortgage being originated as an inducement for the borrower to enter into the original mortgage transaction.

Predatory Lending
Making unaffordable loans based on the assets of the borrower rather than the borrowers ability to repay. Inducing a borrower to refinance a loan repeatedly in order to charge high points and fees each time the loan is refinanced ("loan flipping") . Engaging in fraud or deception to conceal the true nature of the loan obligation from an unsuspecting or unsophisticated borrower.

Pre-Foreclosure Sale
A procedure in which the investor allows a borrower to avoid foreclosure by selling the property for less than the amount that is owed to the investor.

Prepaid Escrow
Amounts paid at closing for property taxes and insurance. These funds are deposited into the escrow account and used to pay the tax and insurance bills when they become due. See escrow .

Prepaid Interest
Mortgage interest that is paid in advance of when it is due, typically, at closing to cover interest from the date of closing to the end of the month.

Prepayment
Any amount paid to reduce the principal balance of a loan before the due date. Payment in full on a mortgage that may result from a sale of the property, the professional loan officer's decision to pay off the loan in full, or a foreclosure. In each case, prepayment means payment occurs before the loan has been fully amortized.

Promissory Note
A written promise to repay a specified amount over a specified period of time.

Prepayment Penalty (PPP)
A fee that may be charged to a borrower who pays off a loan before it is due.

Pre-Qualification Get qualified now!
The process of determining how much money a prospective home buyer will be eligible to borrow before he or she applies for a loan.

Price
When lenders use the term "price," they mean the combination of the interest rate and points you'll pay to get your loan. The rate determines your monthly payment; the points are included in your closing costs.

Prime Rate
The interest rate that banks charge to their preferred customers. Changes in the Prime Rate influence changes in other rates, including mortgage interest rates.

Principal
The amount borrowed or remaining unpaid, excluding interest. The part of the monthly payment that reduces the remaining balance of a mortgage.

Principal Balance
The outstanding balance of principal on a mortgage. The principal balance does not include interest or any other charges. See remaining balance

Principal, Interest, Taxes, and Insurance (PITI)
The four components of a monthly mortgage payment. Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing money. Taxes and insurance refer to the amounts that are paid into an escrow account each month for property taxes and mortgage and hazard insurance.

Programs
See loan program.

Property Taxes
Taxes imposed by local governments based on the assessed value of a parcel of real property.

PUD
See Planned Unit Development.

Purchase and Sale Agreement / Purchase Contract
A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

Purchase Money Transaction
The acquisition of property through the payment of money or its equivalent.