Home Loan Glossary – O & P

O
Original Principal Balance: This is the total amount of money owed on a mortgage home loan before any payments are made or interest expense is included.
Origination Fee: An origination fee is one of the costs paid by a borrower to a lender for a new home loan. This fee typically covers processing and underwriting the home loan application and registering the mortgage against the property as collateral . The origination fee is expressed in the form of percentage points, with one point being equal to 1% of the mortgage amount – for example, $1,000 per $100,000 loaned.
Owner Financing: Owner financing occurs when the seller of a home lends the buyer some or all of the money needed to purchase the home.
P
Partial Payment: Partial payments are payments that are less than the minimum amount due according to the loan terms.
Payment Change Date: This is the date when a new monthly home loan payment comes into effect for adjustable rate mortgages (ARM). According to the terms of most ARMs, the borrower is given 30 days' written notice regarding the new payment amount.
Payoff: A payoff is the repayment of the outstanding balance of a home loan, paid in full.
Periodic Payment Cap: Periodic payment caps are a feature of adjustable rate mortgages (ARM) designed to protect borrowers from payment shock when interest rates are climbing. These caps determine how much loan payments can increase or decrease. One by-product of payment caps can be Negative Amortization. Also compare cap.
Periodic Rate Cap: A period payment cap is a protective feature of adjustable rate mortgages (ARM). It limits the amount the interest rate of an ARM may increase from one adjustment period to the next. This also protects the borrower somewhat from extreme payment increases.. Also see cap.
Personal Property: Any piece of valuable property that is not real estate (real property), or permanently connected to a piece of land, is known as personal property. Furniture, cars, appliances and cash all fall into this category.
Piggyback: A piggyback is a combination of two loans, a first mortgage and a second mortgage, used to purchase a property. For example, a home loan made for 90% of the home's price may consist of a 70% first mortgage and 20% second mortgage. The second mortgage piggybacks on the first one.
PITI: This term usually refers to the monthly mortgage payment, or monthly housing expense, consisting of Principal, Interest, Taxes and Insurance. See Principal, Interest, Taxes, Insurance (PITI).
PITI Reserves: This is the minimum amount of cash that a borrower must have available after making a down payment on a home, and paying all closing costs. The principal, interest, taxes, and insurance (PITI) reserves must be equal to the amount the borrower needs to pay for PITI over a set period of time.
Planned Unit Development: See PUD.
Portfolio Lender: A lender that funds some home loans to keep on their balance sheet is called a portfolio lender. Portfolio lenders may have added flexibility in how they price or underwrite loans, because they are assuming the risk themselves.
Point: A point is an up-front fee paid to the lender for originating a home loan, with one point being equal to 1% of the total mortgage amount. For example, one point is equal to $1,000 on every $100,000 borrowed.
Power Of Attorney: Power of attorney is a legal document that allows one person to act on behalf of another. Power of attorney can give complete authority to another person, or it can be limited to certain functions, acts and/or periods of time.
Prearranged Refinancing Agreement: This is an informal or a formal agreement where the lender pledges to offer a borrower special terms (such as a lower interest rate, fewer closing costs, etc.) on future refinancing. This can be pledged as an incentive during the first mortgage transaction.
Pre-foreclosure Sale: This is a procedure where the lender allows the borrower to avoid foreclosure by selling his or her property. In many instances, the home may be sold for less than is owed to the lender.
Pre-Paid Items: This refers to costs such as prepaid interest, property taxes and homeowners' insurance that must be paid prior to the period for which they will be applied.
Pre-Paid Interest: Pre-paid interest refers to mortgage interest that is payable before it is actually due.
Prepayment: Prepayment refers to money that is paid to reduce the outstanding principal balance of a loan before the payment is actually due. It can be a small amount added to a monthly payment, or a lump sum resulting from a property sale or annual bonus. Prepayment also occurs whenever a loan is paid in full before the maturity date, whether due to a refinance or even a foreclosure. With prepayment, payment occurs ahead of the amortization schedule.
Prepayment Penalty: Prepayment penalties are fees charged on certain loans if a borrower pays off a home loan before a time specified in the loan note. Prepayment penalties are usually associated with loans with lower interest rates.
Pre-qualification: Pre-qualification is a service provided by lenders to help prospective home buyers determine how much money they can afford to borrow. When you apply for a home loan and pre-qualify, you will be asked for information about your credit history, your debts and your assets. Then, based on the loan you want and information you give, the lender can calculate how large a loan you may qualify for.; Getting a Countrywide Home Loans' Full Spectrum Lending Division pre-qualification is not pre-approval for a loan, nor is it a loan commitment. You will be required to submit additional financial information for review before these can be provided.
Primary Residence: This is the place where a person lives for the most days in a calendar year.
Prime Rate: The prime interest rate is what banks charge their most creditworthy customers on short-term loans, and is a popular interest rate index. It may be used to determine rates on adjustable rate loans, such as home equity and consumer credit lines. When the prime rate changes, credit card and mortgage borrowers are often affected.
Principal: The principal refers to the amount borrowed, or the amount that is yet to be repaid. It is also the part of the monthly payment that reduces the remaining balance of a mortgage. Contrast principal with Interest.
Principal Balance: The principal balance is the amount of money still owed on a mortgage or loan. The principal refers only to money borrowed, and excludes all interest or charges. Also see remaining balance.
Principal, Interest, Taxes, And Insurance (PITI): This refers to the 4 parts of a monthly mortgage payment. The principal is the part that decreases the outstanding balance of the mortgage. Interest is the charge for borrowing. Taxes and insurance are the amounts that can be paid into an escrow account each month and can be used to pay property taxes or hazard insurance when they are due.
Principal Payment: This is the portion of your monthly home loan payment that reduces the balance on your loan.
Private Mortgage Insurance (PMI): This is a type of insurance that is provided by a private mortgage insurance firm, and protects the lender against losses if borrowers default. In general, lenders will require private mortgage insurance for a loan if the loan-to-value percentage is higher than 80%. Unlike mortgage insurance provided by government agencies, FHA and VA, the cost of PMI is typically paid by the borrower.
Promissory Note: This is a written loan agreement between borrower and lender, spelling out specific terms, rights and obligations of both parties. In it the borrower pledges to repay a specific amount at a specific cost over a certain period of time.
Public Auction: This is a meeting in a pre-arranged public location where property is sold, sometimes to repay a mortgage that has not been paid by the borrower.
PUD (Planned unit development): A PUD is a real property project or subdivision, including common property, which is collectively maintained and owned by a homeowners' association. It is used by the owners of the individual PUD units.
Purchase Agreement: A purchase agreement is a contract, signed by both the seller and buyer of a property, containing the terms and conditions for the sale of the property.
Purchase Money Transaction/Mortgage: A purchase money transaction or mortgage is a home loan used to pay for a home purchase. This is in contrast to a Refinance Transaction.
Purchase Price: The purchase price is the total amount of money paid to buy a home.