Payment Cap
Limit on the amount by which a borrower’s ARM payments may increase, regardless of rise in interest rates. May result in negative amortization.
Per Diem Interest
Interest calculated per day. Depending on the day of the month on which closing takes place, the borrower pays interest from the date of closing to the end of the month. The first mortgage payment of a loan is generally due the first of the following month.
Permanent Loan
A long-term mortgage of ten years or more.
PITI
Principal, Interest, Taxes and Insurance.
Planned Unit Development (PUD)
A zoning designation for property developed at the same or slightly greater overall density than conventional development, sometimes with improvements clustered between open, common areas. Uses may be residential, commercial or industrial.
Pledged Account Mortgage (PAM)
Money is placed in a pledged savings account. This fund, plus earned interest, is used to gradually reduce mortgage payments.
Point
An amount equal to 1 percent of the principal amount of the investment or note. The lender assesses loan discount points at closing to increase the yield on the mortgage to a position competitive with other types of investments.
Power of Attorney
Legal document authorizing one person to act on behalf of another.
Pre-Qualification
The process of determining how much money a prospective buyer will be eligible to borrower prior to application for a loan.
Prepaid Expenses
Taxes, insurance and assessments paid in advance of due dates, including at closing.
Prepaid Interest
Interest charged to a borrower at closing to cover interest on the loan between closing and the end of the month in which the loan closes.
Prepayment
Full or partial payment of the principal before the due date. This might occur if the borrower makes extra payments, sells the property or refinances the existing loan.
Prepayment Penalty
A fee charged to a borrower who pays a loan before it is due. Not allowed for FHA or VA loans.
Primary Mortgage Market
Includes banks, savings and loan, credit unions and mortgage banks that make mortgage loans directly to borrowers. These lenders sometimes sell their mortgages to lenders such as FNMA in the secondary mortgage market.
Prime Rate
Lowest commercial interest rate charged by a bank on short-term loans to its most creditworthy customers.
Principal
The amount of debt, not counting interest, left on a loan.
Private Mortgage Insurance (PMI)
See Mortgage Insurance.
Profit and Loss Statement
Financial statement showing sales, expenses and profits over a period of time.
Property Tax
A government tax based on the market value of the property.
Purchase Agreement
A written document in which the purchaser agrees to buy certain real estate and the seller agrees to sell under stated terms and conditions. Also called a sales contract, earnest money contract, or agreement for sale.