Understand the most important lending and mortgage terms. Mortgages can be confusing for the first time home buyer, so let us help explain. Below you'll find explanations for most of the mortgage industry terms.
What is Payment cap?
Limit on the amount by which a borrower's ARM payments may increase, regardless of rise in interest rates. This may result in negative…
What is Payment cap (ARM)?
A pre-determined amount that establishes the maximum by which the payment can increase, irrespective of increases to the interest…
What is Payment Change Date?
The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment mortgage (GPM). Generally, the payment change date occurs in the month immediately…
What is Periodic interest cap?
An interest cap that restricts how much adjustable-rate mortgage rates may increase or decrease on pre-determined change…
What is Periodic Rate Cap?
A limit on the amount that the interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might…
What is PITI Reserves?
A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must…
What is Points (or Discount points)?
Interest prepaid to the lender at closing. Each point is equal to 1 percent of the loan amount. Paying more points at closing generally reduces a loan's interest rate and monthly…
What is Pre-payment penalty?
Some ARM loans contain a provision against pre-payment without penalty. Terms of pre-payment penalty clauses vary from product to product, investor to investor, and state to state. Many states and…
What is Prepayment?
A 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…
What is Primary mortgage market?
Includes banks, savings and loans, credit unions, and mortgage bankers who make mortgage loans directly to borrowers. These lenders sometimes sell their mortgages to lenders such as FNMA in the…
What is Principal, Interest, Taxes, and Insurance (PITI)?
The four components of a monthly mortgage payment. Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing…
What is Private Mortgage Insurance (PMI)?
Insurance purchased by a buyer on a conventional loan when a down payment is less than 20 percent of the purchase price to protect the lender against…