P&I - The monthly principal and interest payment required when repaying a mortgage in accordance with its terms.

PITI - (P)rincipal, (I)nterest, (T)axes, and (I)nsurance is a reference to the total monthly payment required to repay a mortgage in accordance with its term as well as monthly escrow payments for taxes and insurance.

Points - Fees that are collected by the lender in exchange for a lower interest rate. Commonly called discount points, each point is equal to 1% of the loan amount. A discount point is considered to be a lender fee. To determine if it is wise to pay discount points to obtain a lower rate, you must compare the up front cost of the points to the monthly savings that result from obtaining the lower rate.

Power of Attorney - A written legal instrument that authorizes another person to act on one's behalf. A power of attorney can grant either complete or limited authority.

Pre-qualification - Procedure to determine how much money a potential homebuyer will be eligible to borrow prior to actually applying for a loan.

Prepaids - Expenses of property ownership or expenses incurred while obtaining a mortgage that must be paid in advance. Prepaids typically include real estate taxes and hazard insurance.

Prepayment - Any amount that is paid to reduce the principal balance, not interest, of a loan before the due date.

Prepayment Penalty - A monetary penalty charged by a lender if all or part of a loan is paid off before it is due.

Prime Rate - The interest rate that banks charge to their best customers for short-term loans. Changes in the prime rate can influence changes in other interest rates.

Principal - The actual balance, excluding interest, of a mortgage loan. Also refers to the amount of the monthly mortgage payment that will be applied to the actual balance.

Principal Balance - The outstanding balance of principal on a loan. Principal does not include interest or fees.

Private Mortgage Insurance - Insurance provided by a private company to protect the mortgage lender against losses that might be incurred if a loan defaults. The cost of the insurance is usually paid by the borrower and is most often required if the loan amount is more than 80% of the home's value. Sometimes referred to as mortgage insurance.

Processing/Administration Fee - A fee charged by a lender to cover the administrative costs of processing a loan request. A processing or administration fee is considered to be a lender fee.

Property Taxes - Taxes based on the assessed value of the home, paid by the homeowner for community services such as schools, public works, and other costs of local government. Sometimes paid as a part of the monthly mortgage payment.

Public Record - A collection of legal documents that are filed with the local government registry so that the public will know what liens, encumbrances or judgements may affect any piece of real estate.

Purchase Agreement - A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

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