Glossary

Payment to income (P/I) ratio
The ratio of the borrowerıs total housing payment (principal, interest, taxes insurance, HOA fees, special assessments, and subordinate financing) that is used to measure the borrower's capacity to manage the housing expense: also known as "housing debt-to-income ratio."

Permanent Buydown
A permanent reduction to the interest rate for the life of the loan. The funds for the buydown may come from the borrower, lender, seller or a third party.

PITI (Principal, Interest, Taxes, and Insurance)
The most common components of a monthly mortgage payment.

Planned Unit Development (PUD)
A real estate project in which each unit owner has title to a residential lot and building and a non-exclusive easement on the common areas of the project.

Plat
A map or chart of a lot, subdivision or community drawn by a surveyor showing boundary lines, buildings, improvements on the land, and easements.

Points
A point is one percent of the amount of the mortgage loan.

Power of attorney
A legal document authorizing one person to act on behalf of another.

Preliminary Title Report
The results of a title search by a title company prior to issuing a title binder or commitment to insure clear title.

Prepaid items
Items that generally must be paid for at the time of closing and are generally recurring charges. Prepaid items may include the following:

• First year premiums for hazard, flood, and mortgage insurance, as applicable to the transaction,
• Prorated interest,
• Any special assessments which must be prepaid (i.e., water/sewer connection, etc.) and,
• Escrow accounts for any of the above.

Prepayment
Payment of mortgage loan, or part of it, before due date. Mortgage agreements often restrict the right of prepayment either by limiting the amount that can be prepaid in any one year or charging a penalty for prepayment. The Federal Housing Administration does not permit such restrictions in FHA insured mortgages.

Pre-payment penalty
Money charged for an early repayment of debt. Prepayment penalties are allowed in some form in 36 states and the District of Columbia.

Pre-qualification
Tentative establishment of a borrowerıs qualification for a mortgage loan amount of a specific amount or ability to make monthly payments at a certain level, based solely on debt-to-income ratios. Pre-qualification is an estimate only is subject to debt and income verification, credit history, property appraisal and other factors.

Primary Mortgage Market
Lenders making mortgage loans directly to borrower's such as savings and loan association, commercial banks and mortgage companies. These lenders sometimes sell their mortgages into the secondary mortgage markets such as FNMA of GNMA, etc.

Primary Residence
A residence which the borrower intends to occupy as the principal residence.

Prime rate
The interest rate designated by a lender as its prime rate and which serves as a basis for the interest rate charged to certain customers.

Principal
The remaining balance due on a debt, exclusive of accrued interest.

Private mortgage insurance
Insurance coverage that many lenders, investors, and government agencies require the borrower to obtain to protect the lender against loss in event of a mortgage default for higher LTV mortgages.

Processing
The preparation of a mortgage loan application and supporting documentation for consideration by a lender or insurer.

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

PUD (Planned Unit Development)
A planned combination of diverse land uses, such as housing, recreation, and shopping in one contained development or subdivision. A major feature of a PUD includes areas of common land for use by the housing unit owners; the association of unit owners generally owns, pays fees, and maintains the common areas. Also see DiMinimus PUD.

Purchase Contract (Agreement/Offer)
An agreement between a buyer and seller of real property, setting forth the price and terms of the sale. Also known as a sales contract.

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, income and other factors.

Qualifying ratios
The percentage of payment to income (P/I) and debt-to-income (D/I) that is used to measure the borrower's capacity to repay the mortgage debt.

Quitclaim Deed
A deed which transfers whatever interest the maker of the deed may have in the particular parcel of land. A quitclaim deed is often given to clear the title when the grantor's interest in a property is questionable. By accepting such a deed the buyer assumes all the risks. Such a deed makes no warranties as to the title, but simply transfers to the buyer whatever interest the grantor has.

Rate Lock Option
An agreement guaranteeing an individual a specified interest rate on a loan provided the loan is closed within a set period of time.

Real Assets
Real estate or real property owned by an individual of business.

Real Estate Broker
An agent who buys and sells real estate for a company, firm, or individual on a commission basis. The broker does not have title to the property, but generally represents the owner.

Real Property
Land and that which is affixed to it.

Refinance
Retirement of an existing debt from the proceeds of a new loan, using the same collateral as security.

Rental income
Income generated by renting property to a tenant.

Reserves
Sometimes referred to as "cash reserves" or "post closing reserves"; this is the amount of liquid assets the borrower has remaining after completion of the mortgage loan transaction and payment of any other debt(s) that had to be satisfied in order for the borrower to qualify for the loan.

Resident alien
A non-U.S. citizen who is granted most of the rights of an U.S. citizen, including permanent residency in the United States. Resident Alien status is usually evidenced by a "Green Card."

RESPA
Abbreviation for the federal Real Estate Settlement Procedures Act, which requires lenders to disclose information on the nature and costs of the real estate settlement process, limits certain fees and charges, and regulates the amount home buyers are required to place in escrow.

Restrictive Convents
Private restrictions limiting the use of real property. Restrictive covenants are created by deed and may "run with the land," binding all subsequent purchasers of the land, or may be "personal" and binding only between the original seller and buyer. The determination whether a covenant runs with the land or is personal is governed by the language of the covenant, the intent of the parties, and the law in the State where the land is situated. Restrictive covenants that run with the land are encumbrances and may affect the value and marketability of title. Restrictive covenants may limit the density of buildings per acre, regulate size, style or price range of buildings to be erected, or prevent particular businesses from operating or minority groups from owning or occupying homes in a given area. (This latter discriminatory covenant is unconstitutional and has been declared unenforceable by the U.S. Supreme Court.)

Reverse Annuity Mortgage (RAM)
A form of mortgage in which the lender makes periodic payments to the borrower using the borrower's equity in the home as satisfaction of the mortgage (The document issued by the mortgagee when the mortgage loan is paid in full).

Revolving debt
A debt that does not have a fixed payment, although repayment is usually a percentage of the outstanding balance and made at regular intervals; most common are credit cards issued by banks or department stores.

Satisfaction of Mortgage
The recordable instrument issued by the lender verifying full payment of a mortgage debt.

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

Second/vacation home
A second home/vacation home that is occupied by the borrower for some portion of the year for his/her exclusive use and enjoyment but which is suitable for year-round occupancy. It cannot be subject to a mandatory rental pool and the borrower does not intend to use the property for income purposes.

Secondary market
A market in which investors like GNMA, FHLMC, FNMA and private organizations buy large numbers of mortgages from the primary lenders and either hold them in a portfolio or package them for sale to others. By selling loan in secondary market, lenders obtain the funds needed to make new loans.

Security
In lending, the collateral given, deposited, or pledged to secure the payment of a debt.

Self-employed borrower
A borrower whose income is derived from a business in which he/she has an ownership interest of 25%or more.

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

Settlement
The closing of a mortgage loan.

Special Assessments
A special tax imposed on property, individual lots or all property in the immediate area, for road construction, sidewalks, sewers, streetlights, etc.

Special Lien
A lien that binds a specified piece of property, unlike a general lien, which is levied against all one's assets. It creates a right to retain something of value belonging to another person as compensation for labor, material, or money expended in that person's behalf. In some localities it is called "particular" lien or "specific" lien. (See lien.)

Special Warranty Deed
A deed in which the grantor conveys title to the grantee and agrees to protect the grantee against title defects or claims asserted by the grantor and those persons whose right to assert a claim against the title arose during the period the grantor held title to the property. In a special warranty deed the grantor guarantees to the grantee that he has done nothing during the time he held title to the property which has, or which might in the future, impair the grantee's title.

Subdivision
An area of land that is platted and subdivided into individual lots.

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

Sweat equity
Equity created by a purchaserıs work on a property purchased.