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Mortgage Loan
Mortgage Terms:
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.
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.
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
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.
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.
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
individual PUD 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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