original principal
balance
The total amount of principal owed on a
mortgage before any payments are made.
origination
fee
On a government loan the loan origination fee is
one percent of the loan amount, but additional points may be charged
which are called "discount points." One point equals one percent of
the loan amount. On a conventional loan, the loan origination fee
refers to the total number of points a borrower pays.
owner
financing
A property purchase transaction in which
the property seller provides all or part of the financing.
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
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.
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.
point
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.
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.
promissory
note
A written promise to repay a specified amount
over a specified period of time.
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.
qualifying
ratiosCalculations that are used in determining
whether a borrower can qualify for a mortgage. There are two ratios.
The "top" or "front" ratio is a calculation of the borrower’s
monthly housing costs (principle, taxes, insurance, mortgage
insurance, homeowner’s association fees) as a percentage of monthly
income. The "back" or "bottom" ratio includes housing costs as will
as all other monthly debt.
quitclaim
deed
A deed that transfers without warranty whatever
interest or title a grantor may have at the time the conveyance is
made.
rate lockA
commitment issued by a lender to a borrower or other mortgage
originator guaranteeing a specified interest rate for a specified
period of time at a specific cost.
real estate
agent
A person licensed to negotiate and transact
the sale of real estate.
Real Estate
Settlement Procedures Act (RESPA)
A consumer
protection law that requires lenders to give borrowers advance
notice of closing costs.
real
property
Land and appurtenances, including anything
of a permanent nature such as structures, trees, minerals, and the
interest, benefits, and inherent rights
thereof.
Realtor
A real estate
agent, broker or an associate who holds active membership in a local
real estate board that is affiliated with the National Association
of Realtors.
recorder
The
public official who keeps records of transactions that affect real
property in the area. Sometimes known as a "Registrar of Deeds" or
"County Clerk."
recording
The
noting in the registrar’s office of the details of a properly
executed legal document, such as a deed, a mortgage note, a
satisfaction of mortgage, or an extension of mortgage, thereby
making it a part of the public record.
refinance
transaction
The process of paying off one loan with
the proceeds from a new loan using the same property as security.
remaining
balance
The amount of principal that has not yet
been repaid. See principal balance.
remaining
term
The original amortization term minus the number
of payments that have been applied.
rent loss
insurance
Insurance that protects a landlord against
loss of rent or rental value due to fire or other casualty that
renders the leased premises unavailable for use and as a result of
which the tenant is excused from paying rent.
repayment
plan
An arrangement made to repay delinquent
installments or advances.
replacement reserve
fund
A fund set aside for replacement of common
property in a condominium, PUD, or cooperative project --
particularly that which has a short life expectancy, such as
carpeting, furniture, etc.
revolving
debt
A credit arrangement, such as a credit card,
that allows a customer to borrow against a preapproved line of
credit when purchasing goods and services. The borrower is billed
for the amount that is actually borrowed plus any interest
due.
right of first
refusal
A provision in an agreement that requires
the owner of a property to give another party the first opportunity
to purchase or lease the property before he or she offers it for
sale or lease to others.
right of
ingress or egress
The right to enter or leave
designated premises.
right of
survivorship
In joint tenancy, the right of
survivors to acquire the interest of a deceased joint tenant.
sale-leaseback
A technique in
which a seller deeds property to a buyer for a consideration, and
the buyer simultaneously leases the property back to the
seller.
second
mortgage
A mortgage that has a lien position
subordinate to the first mortgage.
secondary
market
The buying and selling of existing mortgages,
usually as part of a "pool" of mortgages.
secured
loan
A loan that is backed by collateral.
security
The
property that will be pledged as collateral for a
loan.
seller
carry-back
An agreement in which the owner of a
property provides financing, often in combination with an assumable
mortgage.
servicer
An
organization that collects principal and interest payments from
borrowers and manages borrowers’ escrow accounts. The servicer often
services mortgages that have been purchased by an investor in the
secondary mortgage market