REAL ESTATE GLOSSARY
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partial payment
A payment that is not sufficient to cover the scheduled
monthly payment on a mortgage loan. Normally, a lender will
not accept a partial payment, but in times of hardship you
can make this request of the loan servicing collection
department.
payment change date
The date when a new monthly payment amount takes effect on
an adjustable-rate mortgage (ARM) or a graduated-payment
mortgage (GPM). Generally, the payment change date occurs in
the month immediately after the interest rate adjustment
date. periodic payment
cap
For an adjustable-rate mortgage where the interest rate and
the minimum payment amount fluctuate independently of one
another, this is a limit on the amount that payments can
increase or decrease during any one adjustment period.
periodic rate cap
For an adjustable-rate mortgage, 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.
personal property
Any property that is not real property.
PITI
This stands for principal, interest, taxes and insurance. If
you have an "impounded" loan, then your monthly payment to
the lender includes all of these and probably includes
mortgage insurance as well. If you do not have an impounded
account, then the lender still calculates this amount and
uses it as part of determining your debt-to-income ratio.
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 type of ownership where individuals actually own the
building or unit they live in, but common areas are owned
jointly with the other members of the development or
association. Contrast with condominium, where an individual
actually owns the airspace of his unit, but the buildings
and common areas are owned jointly with the others in the
development or association.
point
A point is 1 percent of the amount of the mortgage.
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
A loosely used term which is generally taken to mean that a
borrower has completed a loan application and provided debt,
income, and savings documentation which an underwriter has
reviewed and approved. A pre-approval is usually done at a
certain loan amount and making assumptions about what the
interest rate will actually be at the time the loan is
actually made, as well as estimates for the amount that will
be paid for property taxes, insurance and others. A
pre-approval applies only to the borrower. Once a property
is chosen, it must also meet the underwriting guidelines of
the lender. Contrast with pre-qualification.
prepayment penalty
A fee that may be charged to a borrower who pays off a loan
before it is due.
pre-qualification
This usually refers to the loan officer's written opinion of
the ability of a borrower to qualify for a home loan, after
the loan officer has made inquiries about debt, income, and
savings. The information provided to the loan officer may
have been presented verbally or in the form of
documentation, and the loan officer may or may not have
reviewed a credit report on the borrower.
prime rate
The interest rate that banks charge to their preferred
customers. Changes in the prime rate are widely publicized
in the news media and are used as the indexes in some
adjustable rate mortgages, especially home equity lines of
credit. Changes in the prime rate do not directly affect
other types of mortgages, but the same factors that
influence the prime rate also affect the interest rates of
mortgage loans.
principal
The amount borrowed or remaining unpaid. 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 on
impounded loans. 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.
private
mortgage insurance (MI)
Mortgage insurance that is provided by a private mortgage
insurance company to protect lenders against loss if a
borrower defaults. Most lenders generally require MI for a
loan with a loan-to-value (LTV) percentage in excess of 80
percent.
promissory note
A written promise to repay a specified amount over a
specified period of time.
public auction
A meeting in an announced public location to sell property
to repay a mortgage that is in default.
Planned Unit Development (PUD)
A project or subdivision that includes common property that
is owned and maintained by a homeowners' association for the
benefit and use of the individualPUD unit owners.
purchase agreement
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.
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