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Glossary

P&I

See Principal and Interest.

Payment Cap

A limit on the amount your monthly payments on an adjustable rate mortgage can increase during each adjustment period. Unlike an interest rate cap, a payment cap does not limit the amount of interest you pay, and could lead to negative amortization.

Piggyback Mortgage

See Second Mortgage.

PITI

An abbreviation for "Principal, Interest, Taxes and Insurance" — the four charges that make up your monthly mortgage payment.

Plan Unit Development (PUD)

A comprehensive development plan for a land area that features common areas owned and shared by the homeowners.

Power of Attorney (POA)

A legal and notarized document authorizing someone else to act on your behalf if you are not able to attend closing. The document must specify the type of loan it is to be used for and include the property address. The closing agent will obtain and coordinate the POA document, which is to be recorded at closing.

Pre-Approval

The process by which you get a preliminary decision on a mortgage loan before making an offer on a home. Having pre-approval can give you an advantage over other homebuyers who may be interested in the same home, because it may give the seller more confidence in your ability to purchase the home.

Pre-Qualification

A preliminary evaluation of your financial status performed by a lender to estimate the amount and type of loans available to you. An evaluation does not include a credit report, and does not formally commit the lender to giving you a loan.

Premium

The amount you pay at regular intervals to maintain coverage on your home insurance and flood insurance if required.

Prepayment

Paying all or part of your mortgage before it is due. Partial prepayments can reduce the amount of your loan. Many mortgage loans offer prepayment without a prepayment penalty — an important consideration when you compare loan programs.

Prepayment Penalty

An amount charged by a lender when you make a prepayment to pay the loan in full before the final term. Not all loan programs have a prepayment penalty.

Primary Mortgage Market

Lenders who make mortgage loans available directly to borrowers. PHH is a primary lender, as are many savings and loan associations and commercial banks. Primary lenders frequently sell their mortgages in the secondary mortgage market, which includes Fannie Mae and Ginnie Mae.

Principal

The amount of your mortgage loan, excluding interest, which has not been paid.

Principal & Interest (P&I)

The two charges that make up your monthly mortgage payment. Principal is the outstanding balance of your loan, and interest is the finance charge on that amount.

Private Mortgage Insurance (PMI)

A policy that guarantees payment of a conventional mortgage loan in case of default. Usually required if your down payment is less than 20 percent of the home's price.