We hope this Glossary of Mortgage and Real Estate Terms helps you understand the home buying and financing process. Should you have any further questions, please do not hesitate to contact your Loan Officer for answers.

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P Terms

Paper:  Credit given by a written obligation that is backed by property.  The term is normally used to refer to Seller financing.  For example, "the Seller took 10% in paper".

 

Parcel:  A piece of property under one ownership.  A lot.

 

Parol Evidence:  Oral evidence rather than written documents.  The parol evidence rule states that when parties put their agreement in writing, all previous oral agreements merge into the written agreement.

 

Partial Payment: In loan collection, a payment that is less than the amount due under the terms of the note.  Usually, it will not be credited to the account until the balance of the amount due is paid.

 

Partial Release: A mortgage lender's or lien holder's relinquishment of its claim to some portion of the property which originally stood as security for the mortgage loan.

 

Participation: A mortgage loan made jointly by two or more lenders or owned jointly by two or more investors.

 

Participation Certificate: A document setting forth the actual package of loans and the share of the package that is being bought or sold.

 

Payment Shock: The a large increase in the borrower's proposed monthly housing expense from their current housing expense.  The question regarding payment shock is can a borrower that currently pays $1,000 a month in rent, handle a mortgage payment of $2,000 a month due to the payment shock.

 

Perfecting Title: The process of eliminating any and all claims, other than the owner's, to the title of a property.

 

Performance Bond: A bond to guarantee performance of a specified act, such as the completion of property or off-site improvements.

 

Permanent Financing: A mortgage loan, usually covering development costs, interim loans, construction loans, financing expenses, and marketing, administrative, legal and other costs.  This loan differs from a construction loan in that the financing goes into place after the project is constructed and open for occupancy.  It is a long-term obligation, generally for a period of 10 years or more.

 

Pipeline: The applications that are actively in processing.

 

PITI:  The abbreviation for Principal Interest Tax and Insurance, also known as the housing expense.  Although principal and interest - PI, is the mortgage payment, it does not represent the borrower's entire monthly housing payment.  The term PITI may be used even if there is no principal, for example a interest only loan; or a condominium which does not have insurance but has a association fee.

 

Planned Unit Development (PUD): A housing project that may consist of any combination of one to four-family homes, condominiums, and other styles of housing. The individual unit and often the real estate under it are owned by the individual owner. The common facilities are owned and maintained by a homeowner's association.

 

Pleadings: The formal allegations by the parties to a lawsuit of their respective claims and defenses for  consideration/disposition by the court.

 

Pledged Account: Funds put into an account to cover the difference in monthly payments of a graduated payment mortgage loan.  Money is withdrawn to supplement the lower monthly principal and interest payment to bring it up to the necessary amount needed to amortize the loan within the contracted term.

 

Pledged Account Loan: A loan partially secured by the buyer or third party depositing funds into a savings account as collateral security for the loan.  A portion of the monthly payment may be drawn from the account over the certain initial years of the loan.

 

PMI: Private Mortgage Insurance which is issued by privately held companies that insure lenders from losses on mortgage programs with less than 20% down payments or equity.  There are many mortgage insurance companies, one of which is known as PMI.  The insurance is correctly know as MI, but the term PMI has gone the way of the term Band Aid.

 

Points: An amount equal to one percent of the principal amount of a note. Loan discount points are a one-time charge assessed at closing by the lender to increase the yield on the mortgage loan to a competitive position with other types of investments.  Points buy down the rate reducing the monthly payment for the borrower.

 

Portfolio Mortgage Lender: Lenders that primarily originate mortgages that will be kept in the lender's own holdings.

 

Power of Sale: A legal procedure in some states in which the lender exercises a right, expressed in the loan documents, to take title to the property of the defaulting borrower and offer it at public sale to the highest bidder.  There is no court action involved.

 

Premium Price: Any price greater than 100 cents on the dollar of the principal balance sold.

 

Prepaid Interest: Interest that the borrower pays the lender before it becomes due.  Most mortgages are due on the first of the month.  At closing, it is common for the borrower to prepay the interest on the number of days remaining in the month for their mortgage.  This brings the borrower current to the first of the next month, after which to mortgages are due in arrears the first of the following month.

 

Prepayment: A loan repayment made in advance of its contractual due date.

 

Prepayment Penalty: A penalty under a note, mortgage or deed of trust, imposed when the loan is paid before its maturity date or an agreed upon time period of time.

 

Prepayment Privilege: The right given a borrower to pay all or part of a debt prior to its maturity.

 

Primary Mortgage Market: The market where mortgage funds are distributed from lenders to individual borrowers. It is contrasted with the secondary mortgage market, where mortgage loans are sold by lenders to investors.  Fannie Mae and Freddie Mac are the major players in the secondary market.

 

Prime Rate:  The interest rate charged by banks for short-term loans to their most creditworthy (lowest risk) business customers.  The prime rate is often used as an index, such as prime plus 1 point.  Prime does not adjust on any regular basis but reacts instantly to market changes such as a change in the Federal Funds Overnight Rate by the Federal Reserve.

 

Principal Balance: The outstanding balance of a mortgage, exclusive of interest due and any other charges.

 

Principal Interest Real Estate Tax Insurance (PITI): The total housing payment which includes principal, interest, taxes and insurance.  Although principal and interest - PI, is the mortgage payment, it does not represent the borrower's entire monthly housing payment (PITI).  The term PITI may be used even if there is no principal, for example a interest only loan; or a condominium which does not have insurance but has a association fee, to describe the housing payment.

 

Processing: Gathering the loan application and all of the required supporting documents (including the property appraisal, credit report, credit history, income, and title) so that a lender can consider the borrower for a loan.

 

Profitability: The challenge a lender faces to structure a loan so that a healthy margin of profit is maintained in an environment of fluctuating interest rates.

 

Promissory Note: A document in which the borrower promises to pay a stated amount on a specific date. The note normally states the name of the lender, the terms for payment and any interest rate.

 

Property Appraisal: A supportable estimate of a property's .market value determined by a trained and certified appraiser who measures the likelihood that a property will maintain Its value over the duration of the loan.

 

Prorate: To divide expenses and income between a buyer and a seller in proportionate shares. For example, a buyer purchases property at midyear after the seller has already paid taxes on the property for the whole year. The buyer reimburses the seller for one-half of those taxes, the pro-rata share, for the buyer's share of that year.

 

PUD: See Planned Unit Development.

 

Purchase Money : Refers to a loan for the purpose of purchasing a home, rather than a loan refinance or home improvement loan.