Terms You Want to Know
(O - Z)
- Origination Fee: A fee
or charge for work involved in evaluating, preparing, and submitting a proposed mortgage
loan. The fee is limited to 1 percent for FHA and VA loans.
- 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. In a PUD
individuals actually own the building or unit they live in, and common areas are owned
jointly with the other members of the development or association. This is in contrast with
condominium, where an individual actually owns the airspace of his unit, but the buildings
and common areas are owned jointly with the others in the development or association.
- 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 and position itself
competitive with other types of investments.
- Pre-Approval: A loosely
used term which is generally taken to mean that a borrower has completed a loan
application and provided debt, income, and savings documentation which an underwriter has
reviewed and approved. A pre-approval is usually done at a certain loan amount and making
assumptions about what the interest rate will actually be at the time the loan is actually
made, as well as estimates for the amount that will be paid for property taxes, insurance
and others. A pre-approval applies only to the borrower. Once a property is chosen, it
must also meet the underwriting guidelines of the lender.
- Prepayment Penalty: A
fee charged to a mortgagor who pays a loan before it is due. Not allowed for FHA or VA
loans.
- Pre-Qualification: This
usually refers to the loan officer’s written opinion of the ability of a borrower to
qualify for a home loan, after the loan officer has made inquiries about debt, income, and
savings. The information provided to the loan officer may have been presented verbally or
in the form of documentation, and the loan officer may or may not have reviewed a credit
report on the borrower.
- Prime Rate: The
interest rate that banks charge to their preferred customers. Changes in the prime rate
are widely publicized in the news media and are used as the indexes in some adjustable
rate mortgages, especially home equity lines of credit. Changes in the prime rate do not
directly affect other types of mortgages, but the same factors that influence the prime
rate also affect the interest rates of mortgage loans.
- Private Mortgage Insurance
(PMI): Insurance written by a private company protecting the lender against loss if
the borrower defaults on the mortgage.
- Promissory Note: A
written promise to repay a specified amount over a specified period of time.
- 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.
- Realtor: A real estate
broker or associate active in a local real estate board affiliated with the National
Association of Realtors.
- Recording: The noting
in the registrar’s office of the details of a properly executed legal document, such
as a deed, a mortgage note, a satisfaction of mortgage, or an extension of mortgage,
thereby making it a part of the public record.
- Regulation Z: The set
of rules governing consumer lending issued by the Federal Reserve Board of Governors in
accordance with the Consumer Protection Act.
- Second Mortgage: A
mortgage that has a lien position subordinate to the first mortgage.
- Secured Loan: A loan
that is backed by collateral.
- Security: The property
that will be pledged as collateral for a loan.
- Subdivision: A housing
development that is created by dividing a tract of land into individual lots for sale or
lease.
- Survey: A drawing or
map showing the precise legal boundaries of a property, the location of improvements,
easements, rights of way, encroachments, and other physical features.
- Tenancy in Common: A
type of joint ownership of property by two or more persons with no right of survivorship.
- Title: A legal document
evidencing a person's right to or ownership of a property.
- Title Insurance Policy: A
policy that protects the purchaser, mortgagee or other party against losses.
- Transfer tax: State
and/or local tax payable when title passes from one owner to another.
- Treasury Index: An
index that is used to determine interest rate changes for certain adjustable-rate mortgage
(ARM) plans. It is based on the results of auctions that the U.S. Treasury holds for its
Treasury bills and securities, or is derived from the U.S. Treasury's daily yield curve.
This curve is based on the closing market bid yields on actively traded Treasury
securities in the over-the-counter market.
- Trustee: A fiduciary
who holds or controls property for the benefit of another.
- VA Loan: A loan that is
partially guaranteed by the Veterans Administration and made by a private lender.
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