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
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
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
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.