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.
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.
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.
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.
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.
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
owner’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.
prepayment penalty
A fee that may be charged to a borrower who pays off a loan before it is due.
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.
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.
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
public auction
A meeting in an announced public location to sell property to repay a
mortgage that is in default.
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 individual PUD unit
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
The acquisition of property through the payment of money or its equivalent.