Payment Cap
Consumer safeguards that limit the amount monthly
payments on an adjustable-rate mortgage may
change. Since they do not limit the amount of
interest the lender is earning, they may cause
negative amortization.
Payment to Income (P/I) ratio
The ratio of the borrower's total housing payment
(principal, interest, taxes, insurance, HOA fees,
special assessments, and subordinate financing)
that is used to measure the borrower's capacity to
manage the housing expense; also known as
"housing debt-to-income ratio."
Per Diem Interest
Interest calculated per day. (Depending on the day
of the month on which closing takes place, you
will have to pay interest from the date of closing
to the end of the month. Your first mortgage
payment will probably be due the first day o f the
following month.)
Permanent buy-down
A permanent reduction to the interest rate for the
life of the loan. The funds for the buy-down may
come from the borrower, lender, seller or a third
party.
PITI
Abbreviation for Principal, Interest, Taxes and
Insurance, the components of a monthly mortgage
payment.
Planned Unit Development (PUD)
A real estate project in which each unit owner has
title to a residential lot and building and a
non-exclusive easement on the common areas of the
project.
Points
Charges levied by the lender based on the loan
amount. Each point is one percent of the loan
amount; for example, two points of a $100,000
mortgage is $2,000. Discount points are used to
buy down the interest rate. Points can also
include a loan origination fee, which is usually
one point.
Power of Attorney
Legal document authorizing one person to act on
behalf of another.
Prepaid Interest
Interest that is paid in advance of when it is
due. Typically charged to a borrower at closing to
cover interest on the loan between the closing
date and the first payment date.
Prepaid Items
Items that generally must be paid for at the time
of closing and are generally recurring charges.
Prepaid items may include the following: first
year premiums for hazard, flood and mortgage
insurance, as applicable to the transaction;
prorated interest; any special assessments which
must be prepaid (i.e., water/sewer connection,
etc.); escrow accounts for any of the above.
Prepayment
The borrower's ability to make full or partial
payments on a loan's principal before they are
due. Paying a mortgage in full or in part before
it is due may incur a penalty if so specified in
the mortgage's prepayment clause.
Pre-qualification
Tentative establishment of a borrower's
qualification for a mortgage loan amount of a
specific amount or ability to make monthly
payments at a certain level, based solely on
debt-to-income ratios. Pre-qualification is an
estimate only and is subject to debt and income
verification, credit history, property appraisal
and other factors.
Prime rate
The interest rate designated by a lender as its
prime rate and which serves as a basis for the
interest rate charged to certain customers.
Principal
The amount of the mortgage loan, not counting
interest.
Private Mortgage Insurance (PMI)
Insurance to protect the lender in case you
default on your loan. With conventional loans,
mortgage insurance is generally not required if
you make a down payment of at least 20% of the
home's purchase price. (Note, however, that FHA
and VA loans have different insurance guidelines.)
Prorate
To proportionally divide amounts owed by the buyer
and the seller at closing.
Purchase Agreement
Contract signed by buyer and seller stating the
terms and conditions under which a property will
be sold.
