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ORIGINAL PRINCIPAL BALANCE
The total amount of principal owed on a mortgage before any
payments are made.
ORIGINATION FEE
A fee paid to a lender for processing a loan application. The
origination fee is stated in the form of points. One point is
1 percent of the mortgage amount.
OWNER FINANCING
A property purchase transaction in which the property seller
provides all or part of the financing
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PARTIAL PAYMENT
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 date.
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 CAP RATE
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.
PERSONAL PROPERTY
Any property that is not real property.
PITI See principal,
interest, taxes, and insurance (PITI).
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
See PUD.
POINT 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 FINANCING 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.
PREFORECLOSURE SALE
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.
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
The process of determining how much money a prospective home
buyer will be eligible to borrow before he or she applies for
a loan.
PRIME RATE The
interest rate that banks charge to their preferred customers.
Changes in the prime rate influence changes in other rates,
including mortgage interest rates.
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. 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
(PMI) 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 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.
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