PITI
Principal, interest, taxes and insurance--the components of a monthly mortgage
payment.
Payment Adjustment Period
The time during which payments on an adjustable-rate mortgage (ARM) may go up
or down.
Payment Cap
The limit that the monthly payment can change from one adjustment period to another.
Also referred to as a Payment Change Cap.
Payment Shock
A situation that occurs when an adjustable-rate mortgage (ARM) monthly mortgage
payments rise very sharply at an adjustment. The borrower may not be able to afford
the payments the loan will require.
Payoff
The complete repayment of loan principal, interest and any other sums due; payoffs
occur either over the full term of the loan through monthly amortization or through
prepayments.
Per Diem Interest
Interest calculated per day and collected from the consumer to cover the period
of time from disbursement of the loan proceeds until the start of the first payment
period.
Periodic Rate Cap
The maximum rate increase for a specific period for a specific loan adjustable-rate
mortgage (ARM) only.
Personal Property Coverage
A policy that covers possession loss incurred off your property (except for scheduled
Valuable Articles.) For example, a homeowner''s policy will only offer 10% of
the total contents limit to apply to items off premises such as personal items
that your child took away to college.
Personal Umbrella/Personal Liability Protection
An insurance policy that pays and renders service on behalf of an insured for
loss arising out of his or her responsibility to another as imposed by law or
assumed by contract.
Planned Unit Developments (PUD)
A subdivision of five or more individually owned lots with one or more other parcels
owned in common or with reciprocal rights in one or more other parcels.
Points
An upfront fee that is collected in addition to the interest on a loan. Each 'point'
charged is equal to 1% of the loan amount. Points may also be referred to as an
'origination fee' or 'discount points' depending on the purpose.
Power of Attorney (POA)
A document in which a person (the principal) gives another person (the attorney
in fact) the legal right to act on his or her behalf in specific transactions.
Pre-Approval
A process that mortgage lenders use to determine how much money they would lend
you based on a thorough review of your financial situation. Lenders issue a pre-approval
letter which strengthens your position when bidding on a home, as it shows sellers
that you will be able to raise funds needed to purchase.
Pre-Qualification
An informal process in which a lender will offer an opinion on how much money
you may be able to borrow. This opinion is based entirely on the financial information
you provide and is neither binding nor necessarily accurate because lenders have
not yet verified your financial information.
Preliminary Title Report
A report made by a title company stating whether there are any other claims to
ownership of a property. A necessary step before a mortgage loan can be approved.
Prepaids
Those expenses of property which are paid in advance of their due date and will
usually be prorated upon sale, such as taxes, insurance, rent, etc.
Prepayment Clause
A clause that stipulates the amount of principal a borrower may prepay ahead of
schedule without penalty as well as the prepayment penalty for larger prepayments.
Prepayment Penalty
A fee charged to a borrower who pays a loan before it is due.
Prime Rate
This typically refers to the best rate for short-term commercial paper. This is
not a stable index.
Principal
The remaining amount or balance of the mortgage loan.
Principal and Interest
The total amount needed to pay on a loan each month. This includes the interest
owed as well as the amount being paid towards the principal.
Private Mortgage Insurance (PMI)
Insurance coverage obtained from mortgage insurance companies to protect lenders
against risk of making higher loan-to-value loans. Typically required on all first
mortgages with an LTV that exceeds 80%. The borrower usually pays the PMI premiums.
Property Appraisal
A written analysis or opinion of the estimated value of a property prepared by
a qualified appraiser.
Purchase Agreement
A written promise to pay a specific amount for a property at a specified time.
The purchase agreement is a written statement of the offer, which both the borrower
and the seller will sign if the offer is accepted.
Purchase Contract
A written promise to purchase and sell a property at a specified time.
Purchase Price
The total sale price of the home.
Purchase Transaction
A loan where the proceeds are used to finance a portion of the total acquisition
price of real property.