A payment that is not sufficient to cover the scheduled monthly payment on a mortgage loan.
payment change date
The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment
adjustable-rate mortgage (GPARM). Generally, the payment change date occurs in the month immediately after the adjustment
periodic payment cap
For an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease during any one
adjustment period. See cap.
periodic rate cap
For an adjustable-rate mortgage (ARM), 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. See cap.
Any property that is not real property.
See principal, interest, taxes, and insurance (PITI).
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
A one-time charge by the lender for originating a loan. 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.
prearranged refinancing agreement
A formal or informal arrangement between a lender and a borrower wherein the lender agrees to offer special terms (such
as a reduction in the costs) for a future refinancing of a mortgage being originated as an inducement for the borrower to
enter into the original mortgage transaction.
A procedure in which the investor allows a mortgagor to avoid foreclosure by selling the property for less than the
amount that is owed to the investor.
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.
A fee that may be charged to a borrower who pays off a loan before it is due.
The process of determining how much money a prospective home buyer will be eligible to borrow before he or she applies
for a loan.
The interest rate that banks charge to their preferred customers. Changes in the prime rate influence changes in other
rates, including mortgage interest rates.
The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a
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. 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.
A written promise to repay a specified amount over a specified period of time.
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 and sale 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.