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Glossary of Terms - P

Partial Payment:

A payment that is less than the scheduled monthly payment on a mortgage loan.

Parties:

Those individuals or entities taking part in a transaction as a principal, such as buyer or seller.

Partition:

A division of real or personal property or the proceeds therefrom among the co-owners of a property.

Partition Action:

Court proceedings by which co-owners seek to sever their joint ownership of a property.

Party Wall:

A wall erected on a property boundary or between two lots for the common benefit and use of the property owners on either side.

Payment Change Date:

The date on which a new monthly payment amount takes effect, for example, on an adjustable-rate mortgage (ARM) loan.

Payment Cap:

For an adjustable-rate mortgage (ARM) or other variable rate loan, a limit on the amount that payments can increase or decrease during any one adjustment period.

Payoff Amount:

A written document or amount received from the lender that would be necessary to pay a mortgage loan off in full.

Personal Property:

Any property that is not considered real property.

PITI:

An acronym that represents the four primary components of a monthly mortgage payment:  principle, interest, taxes and insurance (PITI).

PITI Reserves:

A cash amount that a borrower has available after making a down payment and paying closing costs for the purchase of a home.  The principal, interest, taxes and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a pre-defined number of months.

Planned Development:

A subdivision consisting of separately owned parcels of land together with membership in an association which owns common area.  Sometimes the owners of separate interests also have an undivided interest in the common area.  This term is normally used interchangeably with the term “planned unit development.”

Planned Unit Development (PUD):

A real estate project in which individuals hold title to a residential lot and home while the common facilities are owned and maintained by a homeowners’ association for the benefit and use of the individual PUD unit owners.  This term is normally used interchangeably with the term “planned development.”

Planning Commission:

An agency of local government charged with planning the development, redevelopment or preservation of an area.

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 one-time only fee that is paid up-front to a mortgage lender, sometimes in exchange for a slightly lower mortgage interest rate throughout the duration of the loan term.  One point equals one percent of the total loan amount you plan to borrow.  For example, if a loan is made for $50,000, one point equals $500.

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.

Pre-Approval:

A process by which a lender provides a prospective borrower with an indication of how much money he or she will be eligible to borrow when applying for a mortgage loan. This process typically includes a review of the applicant’s credit history and may involve the review and verification of income and assets to close.

Pre-Approval Letter:

A letter from a mortgage lender indicating that you qualify for a mortgage of a specific amount. It also shows a home seller that you’re a serious buyer.

Pre-Qualification:

A preliminary assessment by a lender of the amount it will lend to a potential home buyer. The process of determining how much money a prospective home buyer may be eligible to borrow before he or she applies for a loan.

Pre-Qualification Letter:

A letter from a mortgage lender that states that you’re pre-qualified to buy a home, but does not commit the lender to a particular mortgage amount.

Predatory Lending:

Abusive lending practices that include making mortgage loans to people who do not have the income to repay them or repeatedly refinancing loans, charging high points and fees each time and “packing” credit insurance onto a loan.

Premium:

The amount paid for an insurance policy, such as flood, hazard, mortgage, property or title insurance.

Prepayment:

The payment of a mortgage loan, or part of it, prior to the due date.  Mortgage agreements often try to restrict the right of prepayment either by limiting the amount that can be prepaid in any one year or charging a percentage-based penalty for prepayment.  The Federal Housing Administration (FHA) does not permit such restrictions in FHA-insured mortgages and many states have adopted laws against this practice.

Prepayment Penalty:

A fee that a borrower may be required to pay to the lender, in the early years of a mortgage loan, for repaying the loan in full or prepaying a substantial amount to reduce the unpaid principle balance.

Principal:

The amount of money borrowed or the amount of the loan that has not yet been repaid to the lender. This does not include the interest you will pay to borrow that money. The principal balance (sometimes called the outstanding or unpaid principal balance) is the amount owed on the loan minus the amount you’ve repaid.

Private Mortgage Insurance (PMI):

Insurance for conventional mortgage loans that protects the lender from loss in the event of default by the borrower.

Procuring Cause:

The cause originating from a series of events that, without a break in continuity, results in the prime object of an agent’s employment producing a final buyer.  In other words, the real estate agent who first procures a ready, willing and able buyer for the agreed upon price and terms and is entitled to the commission.

Promissory Note:

Following a loan commitment from the lender, the borrower signs a written promise to repay a specified amount over a specified period of time.  The promissory note establishes personal liability for its payment and represents the evidence of the debt.

Proration:

Adjustments of interest, taxes and insurance on a pro rata basis as of the closing of a real estate transaction or some agreed upon date.  This is normally done by the escrow holder at the time of the closing of a transaction.

Purchase and Sale Agreement:

A document that details the price and conditions for a transaction. In connection with the sale of a residential property, the agreement typically would include: information about the property to be sold, sale price, down payment, earnest money deposit, financing, closing date, occupancy date, length of time the offer is valid, and any special contingencies.

Purchase Money Mortgage:

A mortgage loan that enables a borrower to acquire a property.