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Mortgage Glossary

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Payment Adjustment Period

The length of time (typically a year) between changes to the borrower's P&I (Principal & Interest) payment.

Payment Buy down
Payment buy downs occur when a third party, typically a builder, pays part of the initial P&I payments for a year or two, so that the borrower has smaller payments and can qualify for the loan.

Payment Cap
A limit on the amount the payment can be changed at the end of each Payment Adjustment Period.

Payment Discount
In a payment discount, the lender reduces the first year's interest rate to make the mortgagor more attractive to borrowers.

Periodic payment cap
A limit on the amount that payments can increase or decrease during any one-adjustment period.

Periodic rate cap
A limit on the amount that the interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might be.

Personal property
Any property that is not real property.

Principal, Interest, Taxes and Insurance are components of a mortgage payment.

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

A one-time charge by the lender to increase the yield of the loan; a point is 1 percent of the amount of the mortgage.

Power of attorney
A legal document that authorizes another person to act on one’s behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.

Payment of mortgage loan, or part of it, before due date.

The process of determining how much money a prospective homebuyer will be eligible to borrow before application.

Prime rate
The interest rates that banks charge to their preferred customers.

The amount borrowed or remaining unpaid, also, that part of the monthly payment that reduces the outstanding balance of a mortgage.

Private Mortgage Insurance
Insurance provided by nongovernmental insurers that protect lenders against loss if a borrower defaults.

Promissory note
A written promise to repay a specified amount over a specified period of time.

Public auction
A meeting in an announced public location to sell property to repay a mortgage that is in default.

Planned Unit Development (PUD)
A project or subdivision that includes common property that is owned and maintained by a homeowners' association for the benefit and use of the individual PUD unit owners.

Purchase Agreement
See Agreement of Sale.

Purchase money transaction
The acquisition of property through the payment of money or its equivalent.