A payment that is not sufficient to cover the scheduled monthly payment on
a mortgage loan.
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.
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.
Any property that is not real property.
See principal, interest, taxes and insurance (PITI) below.
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
See PUD below.
A one-time charge by the lender for originating a loan. 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.
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
A procedure in which the investor allows a mortgagor to avoid
foreclosure by selling the property for less than the amount that is owed
to the investor.
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.
A fee that may be charged to a borrower who pays off a loan before it
The process of determining how much money a prospective home buyer
will be eligible to borrow before he or she applies for a loan.
The interest rate that banks charge to their preferred customers.
Changes in the prime rate influence changes in other rates, including
mortgage interest rates.
The amount borrowed or remaining unpaid. The part of the monthly
payment that reduces the remaining balance of a mortgage.
The outstanding balance of principal on a mortgage. The principal
balance does not include interest or any other charges. See remaining
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.
private mortgage insurance (PMI)
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.
A written promise to repay a specified amount over a specified period
A meeting in an announced public location to sell property to repay a
mortgage that is in default.
PUD (Planned Unit Development)
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 and sale 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