Payment Cap
For an adjustable rate mortgage, the loan's payment cap is the maximum increase the required payment can adjust to in any given time period. |
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Periodic Payment Cap
The interest rate and the minimum payment amount fluctuate independently in some adjustable rate mortgages (ARM). In such cases, a limit is placed on how much payments can be increased or decreased in any single adjustment period. |
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PITI (principal, interest, taxes, and insurance)
Ordinarily, the principal and interest payment on most loans is fixed throughout the life of the loan. However, taxes and insurance may change in accordance with property value revisions or adjustments to insurance costs. Thus, the PITI figure represents the total monthly payment. It is typically used in order to calculate a prospective buyer's debt-to-income ratio (the percentage of monthly gross income that is consumed by existing debt). |
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Plans and Specifications
Prospective buyers and investors often request to review the architectural and engineering specifications for the construction of a building or real estate development project. Information typically included contains descriptions of materials to be used and the manners in which they are to be applied. |
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Power of Attorney
Power of attorney grants official authorization for one person to act for or represent the interest of another with respect to formal legal transactions. This can represent total legal authority, or legal authority limited to only a selected set of responsibilities within predetermined time frames. |
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Pre-Approval
Loosely defined, a pre-approved borrower is generally recognized to have completed a loan application and provided debt, income, and savings documentation which a lender or underwriter has found acceptable. Pre-Approval applies only to the borrower, not the overall transaction, so once a property has been selected, it must still meet all of the qualifications and guidelines of the lender. |
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Pre-Closing
Prior to the formal closing, a meeting to resolve outstanding issues (such as survey, pest inspection, hazard insurance, etc.) sometimes takes place, with the formal closing proceeding shortly thereafter. |
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Pre-Payment
In order to more quickly reduce the loan principal (and subsequent life of the loan), a borrower may opt to furnish a mortgage loan payment, in part or in full, before the actual due date. Because this has the effect of reducing the total compensation the lender ultimately receives, some mortgage agreements put restrictions on the right of prepayment, and may even charge a pre-payment penalty (However, FHA insured mortgages do not permit such restrictions). |
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Pre-Qualification
A loan officer may provide a written opinion of the ability of a prospective buyer to qualify for a home loan. Toward that end, an inquiry may be made concerning the borrower's existing debt, income and savings. The borrower's credit report may also be reviewed. |
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Prime Rate
Simply put, the prime rate is the standard interest charged by banks to customers that have been deemed creditworthy. It is often used as an index when calculating rate changes to adjustable rate mortgages (ARM). |
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Private Mortgage Insurance (PMI)
Lenders sometimes protect themselves against potential losses (due to borrower default) by utilizing the services of a third party insurance provider. Mortgage insurance is generally required for loans with a loan-to-value (LTV) ratio in excess of 80%. |
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Public Auction
When a mortgage formally defaults, a meeting takes place in an announced public location for the purpose of selling the property to the highest bidder (in order to minimize the lender's losses). During such public auctions (sometimes called public sales), the bidders' identities are not hidden and anyone may attend. |
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Purchase Agreement
A purchase agreement is a formal, legally binding contract, signed by both the buyer and seller, detailing the price and terms under which a property will be sold. |
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