Mortgage Glossary
N
Negative Amortization: occurs when the monthly payments do not cover all the
interest cost. The interest cost that is not covered is added to
the unpaid principal balance. This means that even after making
many payments, you could owe more than you did at the beginning
of the loan. Negative amortization can occur when an adjustable-rate mortgage (ARM) has a payment
cap that results in monthly payments not high enough to cover the
interest due. For more information,
see our guide explaining how
negative amortization works.
O
Offer: indication by a potential buyer of a willingness to purchase
a home at a specific price; generally put forth in writing.
Origination: the process of preparing, submitting, and evaluating
a loan application; generally includes a credit check, verification
of employment, and a property appraisal.
Origination fee: the charge for originating a loan; is usually
calculated in the form of points and paid at closing.
P
Partial Claim: a loss mitigation option offered by the FHA that
allows a borrower, with help from a lender, to get an interest-free
loan from HUD to bring their mortgage payments up to date.
PITI: Principal, Interest, Taxes, and Insurance - the four elements
of a monthly mortgage payment; payments of principal and interest
go directly towards repaying the loan while the portion that covers
taxes and insurance (homeowner's and mortgage, if applicable) goes
into an escrow account to cover the fees when they are due.
Points: additional
charges imposed by the lender that are usually prepaid by the consumer
at settlement but can sometimes be financed by adding them to the
mortgage amount. One point is equal to 1 percent of the principal
amount of your mortgage. For example, if the mortgage is for $65,000,
one point equals $650. Lenders frequently charge points in both
fixed-rate and adjustable-rate mortgages in order to increase
the yield on the mortgage and to cover loan closing costs. These
points usually are collected at closing and may be paid by the
borrower or the home seller, or may be split between them. Also
see our guide explaining how points
may be deductible on your income taxes.
PMI: Private Mortgage Insurance;
mortgage insurance programs offered
by privately-owned companies to assist qualified borrowers
with making down payments of less than 20% of a purchase price.
Pre-approve: lender commits to lend to a potential borrower; commitment
remains as long as the borrower still meets the qualification requirements
at the time of purchase.
Pre-foreclosure sale: allows a defaulting borrower to sell the
mortgaged property to satisfy the loan and avoid foreclosure.
Pre-qualify: a lender informally determines the maximum amount
an individual is eligible to borrow.
Premium: an amount paid on a regular schedule by a policyholder
that maintains insurance coverage.
Prepayment: payment of the mortgage loan before the scheduled
due date; may be Subject to a prepayment penalty.
Principal: the amount borrowed from a lender; doesn't include
interest or additional fees.
The information provided in this website is
not legal advice and should not be interpreted as legal advice.
This website is intended to provide a basic understanding of this
information in summary form. This information may not be comprehensive,
is subject to change, and may not apply to all individual circumstances.
Any information received here should be confirmed with the appropriate
government agencies or with an attorney, particularly as it relates
to your individual circumstances. Your use of this website indicates
your agreement to be bound by our Terms
of Use. © Copyright 2005-2013 MortgagesFinancingandCredit.org |
