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Payment cap. A provision of some ARMs limiting how much a borrower’s payments may increase regardless of how much the interest rate increases; can result in negative amortization.
PITI. Stands for principal, interest, tax, and insurance - the components of a monthly mortgage payment.
PMI. Private mortgage insurance.
Points. A one-time charge by the lender to increase the yield of the loan; a point is one percent (1%) of the amount of the mortgage.
Pre approval. A letter from a lender stating how much money the borrower can obtain.
Prepayment penalty. A fee charged to a borrower who pays off a loan before it is due.
Pre qualification. The process of determining how much money a prospective homebuyer will be eligible to borrow before a loan is applied for.
Principal. The amount borrowed or remaining unpaid; also that part of the monthly payment that reduces the outstanding balance of a mortgage.
Private mortgage insurance (PMI). Insurance provided by nongovernmental insurers that protects lenders against loss of a borrower defaults.
Purchase and sale agreement. A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.
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