Glossary Glossary Index | A B C | D E F | G H I J K L M N | O P Q R S T U V Z   Origination Fee   A fee imposed by a lender to cover certain expenses in connection with making a real estate loan. Usually a percentage of the loan amount.   Back to glossary index   P & I   See Principal and Interest.   Back to glossary index   Payment Cap   See Rate Cap.   Back to glossary index   PITI   PITI is an abbreviation for Principal, Interest, Taxes and Insurance.   Back to glossary index   Points   Points are a percentage of the loan amount paid at closing that may affect the interest rate. For instance, on a $90,000 loan amount, 1 point = 1 % or $900. If points are paid, the borrower may buy down the rate. Alternatively, in exchange for a higher rate, the lender may pay points to offset borrower's closing costs. These are considered negative points.   Back to glossary index   Prepayment   Paying off an entire mortgage before it is due. Many mortgage loans offer prepayment without penalty. This may be important to keep in mind when comparing loan programs.   Back to glossary index   Prepayment Penalty   A charge a borrower pays a lender when the borrower wants to pay off a mortgage loan in advance of the agreed payment schedule. Not all loan programs have a prepayment penalty.   Back to glossary index   Pre-qualification   A preliminary evaluation of a borrower's financial status by a lender to estimate the amount and type of loans available to that borrower. This evaluation does not include a 3rd party credit report, and the lender does not formally commit to giving the borrower a loan.   Back to glossary index   Principal   The outstanding balance of a loan, excluding interest.   Back to glossary index   Principal & Interest (P&I)   Principal is the portion of the mortgage payment that goes to reduce the outstanding balance of the loan. Interest is the portion of the mortgage payment that goes to pay the finance charge on the outstanding balance of the loan. The borrower pays a portion of these each month as part of their monthly mortgage payment.   Back to glossary index   Private Mortgage Insurance (PMI)   Insurance paid by the borrower that protects the lender in case of default on a loan. With conventional loans, mortgage insurance is generally not required with a down payment of at least 20%. Also known as mortgage insurance.   Back to glossary index   Property Type   See Condominium, Co-op, Manufactured Housing, Planned Unit Development, Multi-family, Single Family Attached Home, or Single Family Detached Home.   Back to glossary index   Planned Unit Development (PUD)   Subdivision having lots or areas owned in common and reserved for the use of some or all of the owners of the separately owned lots. Also, a comprehensive development plan for a large land area. A PUD usually includes residences, roads, schools, recreational facilities, commercial, office and industrial areas.   Back to glossary index   Purchase Price   The price a buyer pays to purchase a home.   Back to glossary index   Qualify   The ability to meet a loan program's predetermined guidelines such as income, assets, credit history and debt.   Back to glossary index   Qualifying Ratios   The percentages that a lender will compare to see whether a borrower qualifies for a loan. This is made up of the debt-to-income ratio and the housing ratio.   Back to glossary index   Rate   See Interest Rate.   Back to glossary index   Rate Cap   A limit on how much the interest rate on an ARM loan can change in an adjustment period or over the life of the loan. For example, if a borrower's adjustment cap is 1% and current interest rate is 6%, then the newly adjusted rate will be between 5% and 7%. A lender will provide this information for each of its ARM products.   Back to glossary index   Rate Float   The rate has not been secured and will fluctuate with the current market until protected by either a rate lock or rate protection.   Back to glossary index   Rate Lock   A lender's commitment to lend money at a particular interest rate as long as the loan closes and funds within a specified time period. The lock protects against rate increases during that time.   Back to glossary index   Rate Protection   A lender adds a cap to the current interest rate, which represents the maximum interest rate a borrower will pay as long as the loan closes and funds before the rate expiration, even if rates increase. If rates drop, the borrower will have a one-time option to lock in at a lower rate.   Back to glossary index   Refinancing   The process of paying off one loan with the proceeds from a new loan, using the same property as security. Homeowners may refinance to lower their interest rate, shorten the term of their loan, or to get cash out of the property's equity.   Back to glossary index   Second Mortgage   A second mortgage is a mortgage that has rights subordinate to a first mortgage. Also called second trust.   Back to glossary index   Settlement Statement   See Closing Statement.   Back to glossary index   Single Family Attached Home   A home where the customer owns the dwelling and lot but shares common wall(s) with another structure.   Back to glossary index   Single Family Detached Home   A free-standing home without any homeowner's association dues. If a homeowner pays homeowner's association dues, the property would be considered a detached home in a planned unit development.   Back to glossary index   Subject Property   The property to be secured by the mortgage loan.   Back to glossary index   Survey   A measurement of land, prepared by a licensed surveyor, showing a property's boundaries, elevations, improvements and relationship to surrounding tracts. The buyer typically pays for the survey of the property.   Back to glossary index   Term of Loan   The amount of time a borrower has to repay the mortgage loan. It's usually expressed as a number of months. For example, the term for a 30-year fixed-rate mortgage is 360 months (30 years X 12 months).   Back to glossary index   Title   A document that gives evidence of ownership of a property.   Back to glossary index   Title Insurance   Insurance that protects the lender or buyer against losses resulting from disputes over the title of a property. Lender Title Insurance is required to close a loan and is typically paid for by the buyer. A buyer must purchase their own separate title insurance policy to protect their interests.   Back to glossary index   Title Search   Examination of public records, laws, and court decisions to ensure that no one except the seller has a valid claim to the property. A title search is required by the lender and is a standard part of closing costs paid for by the buyer.   Back to glossary index   Transfer Tax   Depending on the location, this is the tax levied by state or local governments when property passes from one owner to another.   Back to glossary index   Total Monthly Payment   The sum of the loan principal, interest, taxes and insurance (PITI) that the borrower pays the lender monthly.   Back to glossary index   Truth-in-Lending Act   A federal law requiring disclosure of credit terms in a standard format known as the truth-in-lending statement. With these statements, a prospective buyer can better compare the lending terms of different financial institutions.   Back to glossary index   Underwriting   In mortgage lending, the analysis of the risk involved in making a mortgage loan to determine whether the risk is acceptable to the lender. Underwriting involves the evaluation of the property as outlined in the appraisal report, and of the borrower's ability and willingness to repay the loan.   Back to glossary index   VA Mortgage   A mortgage guaranteed by the Department of Veteran Affairs and only available for military personnel, veterans, or spouses of veterans who died of service-related injuries. Because the loan is guaranteed, it requires little or no down payment.   Back to glossary index   Veterans Administration (VA)   A government agency that administers benefit programs to help veterans return to civilian life, including guaranteed mortgage loans with little or no down payment.   Back to glossary index