P

PITI

Principal, Interest, Taxes, and Insurance. These are the four components that typically make up a homeowner's mortgage payment.

 

Planned Unit Development (PUD)

A type of real estate development that includes common areas and rules governed by an owners' association.

 

Points

Monies paid to "buy down" the interest rate of a mortgage loan. One "point" equals 1% of the mortgage amount. Lenders generally offer loans with several combinations of interest rates and points. Generally, the more points paid, the lower the interest rate. The best choice of interest rate/points may depend on how often you refinance.

 

Pre-foreclosure Sale

A procedure in which the borrower is allowed to sell his or her property for an amount less than what is owed on it to avoid a foreclosure. This sale fully satisfies the borrower's debt.

 

Pre-Paids

Expenses such as taxes, insurance and assessments which are paid in advance of their due date and which must be paid by the buyer on a prorated basis at closing.

 

Prepayment Penalty

Lenders who impose prepayment penalties will charge borrowers a fee if they which to repay part or all of their loan in advance of the regular schedule.

 

Principal

The amount of debt, not including interest, on a loan.

 

Pre-Qualification

An initial evaluation by a lender of a borrower's credit and financial situation to determine eligibility for a loan.

 

Private Mortgage Insurance (PMI)

Usually required by a lender if the down payment or equity position is less than 20% of the sale price/appraised value. PMI protects the lender in the vent of a default, and is usually terminated when the homeowner has built up 20% equity in the home.

Q

Qualifying Ratio

The ratio of the borrower's fixed monthly expenses to his/her gross monthly income. Ratios are expressed as two numbers like 28/36 where 28 would the Front-End Ratio and 36 would be the Back-End Ratio. See Front-End Ratio and Back-End Ratio.

R

Real Estate

Also known as real property. Land and anything permanently affixed to the land, such as a building.

 

Real Estate Agent

A licensed individual, designated to act on the behalf of either the buyer, or the property owner, in a real estate transaction. Also known as a realtor.

 

Recourse

The right of the holder of a note secured by a mortgage or deed of trust to look personally to the borrower or endorser for payment.

 

Refinancing

Securing a new loan that pays off the current mortgage(s), using the same property as security. Often done to obtain a lower interest rate or to gain access to equity for cash back.

 

Release

An instrument releasing property from the lien of the mortgage, judgment, etc.

 

RESPA (Real Estate Settlement Procedures Act)

A federal regulation that requires lenders and mortgage brokers to disclose to borrowers, in advance, the fees required to obtain a mortgage loan.

 

Restrictive Covenant

A clause in a deed that restricts the use of property for some period of time.

S

Second Mortgage

A mortgage that has a lien in the second position.

 

Secondary Market

The buying and selling of existing mortgages by entities such as commercial banks, pension funds, and Wall Street firms.

 

Servicer

The entity that collects payments and manages escrow accounts of a loan. Often designated when a loan has been purchased by a secondary market investor.

 

Sub-prime

Credit that is less-than-perfect. This may include late or missed payments, past bankruptcies, or judgments. A borrower whose credit is considered sub-prime may still be eligible for a loan, but will generally be subject to higher interest rates.