P - T

payment cap

See: cap.

P&I

Abbreviation for principal and interest.

PITI

Abbreviation for principal, interest, taxes and insurance.

points

Charges levied by the lender based on the loan amount. Each point equals one percent of the loan amount; for example, two points on a $100,000 mortgage is $2,000. Discount points are used to buy down the interest rate. Points can also include a loan origination fee, which is usually one point.

pre-qualification

Tentative establishment of a borrower's qualification for a mortgage loan amount of a specific range, based on the borrower's assets, debts, and income.

prime rate

The interest rate commercial banks charge their most creditworthy customers.

principal

The amount of the entire mortgage loan, not counting interest. Also, as a part of PITI, the amount of the monthly mortgage payment which does not include the interest, insurance, and taxes.

private mortgage insurance (PMI)

See: mortgage insurance.

property appraisal

See: appraisal.

property tax

The amount which the state and/or locality assesses as a tax on a piece of property.

prorate

To proportionally divide amounts owed by the buyer and the seller at closing.

qualification

As determined by a lender, the ability of the borrower to repay a mortgage loan based on the borrower's credit history, employment history, assets, debts and income.

rate cap

See: cap.

RESPA

Abbreviation for the Real Estate Settlement Procedures Act, which allows consumers to review settlement costs at application and once again prior to closing.

reverse annuity mortgage

A type of mortgage loan in which the lender makes periodic payments to the borrower. The borrower's equity in the home is used as security for the loan.

RHCDS

Rural Housing and Community Service

right of first refusal

Purchasing a property under conditions and terms made by another buyer and accepted by the seller.

right of rescission

When a borrower's principal dwelling is going to secure a loan, the borrower has three business days following signing of the loan documents to rescind or cancel the transaction. Any and all money paid by the borrower must be refunded upon rescission. The right to rescind does not apply to loans to purchase real estate or to refinance a loan under the same terms and conditions where no additional funds will be added to the existing loan.

rollover

At the end of the construction loan period, the borrower's file is delivered to Bank One Mortgage Loan Servicing Dept. Prior to delivery, CLD contacts the borrower and obtains funds for the tax and insurance escrows, a final title policy and homeowner's policy. This process is called a rollover.

Rural Housing and Community Development Service

A federal agency that administers mortgage loans for buyers in rural areas.

second mortgage

A loan that is junior to a primary or first mortgage and often has a higher interest rate and a shorter term.

secondary market

A market comprising investors like GNMA, FHLMC and FNMA, which buy large numbers of mortgages from the primary lenders and sell them to other investors.

servicing

The responsibility of collecting monthly mortgage payments and properly crediting them to the principal, taxes and insurance, as well as keeping the borrower informed of any changes in the status of the loan.

settlement costs

See: closing costs.

survey

A physical measurement of property done by a registered professional showing the dimensions and location of any buildings as well as easements, rights of way, roads, etc. 

tax deed

A written document conveying title to property repossessed by the government due to default on tax payments.

tax savings

The amount of money that the homeowner is not required to pay the government in taxes because he or she owns a home.

taxes

As a part of PITI, the amount of the monthly mortgage payment which does not include the principal, interest, and insurance.

tenancy

joint tenancy - equal ownership of property by two or more parties, each with the right of survivorship.

tenancy by the entireties - ownership of property only between husband and wife in which neither can sell without the consent of the other and the property is owned by the survivor in the event of death of either party.

tenancy in common - equal ownership of property by two or more parties without the right of survivorship.

tenancy in severalty - ownership of property by one legal entity or a sole party.

tenancy at will - a license to use or occupy a property at the will of the owner.

title

A formal document establishing ownership of property.

title insurance

A policy issued by a title insurance company insuring the purchaser against any errors in the title search. The cost of title insurance may be paid for by the buyer, the seller or both.

trust deed

See: deed of trust.

Truth In Lending Act

The Truth In Lending Act requires lenders to disclose the Annual Percentage Rate and other associated costs to homebuyers within three working days of the loan application.