Glossary of commonly used terms and phrases

P

Participation - A mortgage where the lender receives a percentage of the gross proceeds along with the mortgage payments.
top

Participation Certificates - A mortgage security rather than a mortgage. The certificate is more readily marketable.
top

Payment Adjustment Period - The length of time, typically six months to a year, between changes to the AML borrower's P&I payment.
top

Payment Buy Down - Payment buy downs occur when a third party, typically a builder, pays part of the initial P&I payments for a year or two, so that the borrower has smaller payments and can qualify for the loan.
top

Payment Cap - A limit on the amount the payment can be changed at the end of each Payment Adjustment Period.
top

Payment Discount - In a payment discount, the lender reduces the first year's interest rate to make the mortgagor more attractive to borrowers.
top

Payoff - The full payment of an existing loan or any other type of lien.
top

Perfecting Title - The process of eliminating any adverse claims against a title.
top

Periodic Payment Cap - A limit on the amount that payments can increase or decrease during any one-adjustment period.
top

Periodic Rate Cap - 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.
top

Personal Property - Any property that is not attached to real property.
top

Physical Assessment - Report Engineering and physical assessment of the property. Completed in addition to the appraisal.
top

PITI - Principal, Interest, Taxes and Insurance are components of a mortgage payment.
top

PITI Ratio - The ratio used in mortgage lending decisions that consists of the principal, interest, tax, and insurance payment to the total gross income.
top

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.
top

Plat - A map or chart of a lot, subdivision or community drawn by a surveyor showing boundary lines, buildings, improvements on the land, and easements.
top

Pledged Account Mortgage (PAM) - Money that is placed in a pledged savings account. This fund, and earned interest, is used to reduce monthly mortgage payments.
top

Points - Charges levied by the mortgage lender to obtain a better interest rate and usually payable at closing. One point represents 1% of the mortgage loan amount.
top

Possibility of Reverter - The term refers to the chance that an estate will exist as some future time. An example would be a property sold on the condition that it would be a park, but if not used for that, it would revert back to the seller who would then have a “possibility of reverter.”
top

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.
top

Pre-approval - A process whereby a potential home buyer secures a conditional credit approval before making an offer on a home.
top

Pre-paids - Those expenses of property which are paid in advance of their due date and will usually be prorated upon sale, such as taxes, insurance, and interest.
top

Pre-qualification - The process of determining how much money a prospective homebuyer will be eligible to borrow before application.
top

Premium - The amount paid for a property above the expected price, or the value of a mortgage or bond in addition to its face amount.
top

Prepayment - Payment of mortgage loan, or part of it, before due date.
top

Prepayment Penalty (PPP) - A charge imposed by a mortgage lender on a borrower who wants to pay off part or all of a mortgage loan in advance of schedule.
top

Prescriptive Easement - An easement granted by a court based on the assumption that a written easement was given after a period of continuous use of the land, although none existed.
top

Prime Rate - The interest rates that banks charge to their preferred customers.
top

Principal - The amount borrowed or remaining unpaid. Also, that part of the monthly payment that reduces the outstanding balance of a mortgage.
top

Principal Balance - The outstanding balance of principal on a mortgage, which does not include interest or any other charges.
top

Private Mortgage Insurance (PMI) - Insurance provided by nongovernmental insurers that protect lenders against loss if a borrower defaults. Fannie Mae generally requires private mortgage insurance for loans with loan-to-value (LTV) percentages greater than 80%.
top

Pro rate - The allocation of proportionate shares of certain expenses, such as interest, to be paid by the buyer and seller at closing.
top

Promissory Note - A written promise to repay a specified amount over a specified period of time.
top

Property Classification - A classification that a lender gives to a property according to its age and needed repairs.
top

Property Tax - Local tax assessed on the market value of a property
top

Public Auction - A meeting in an announced public location to sell property to repay a mortgage that is in default.
top

Purchase Agreement - See Agreement of Sale.
top

Purchase Money Transaction - The acquisition of property through the payment of money or its equivalent.
top

 


Equal Opportunity LenderEqual Housing Opportunity