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Payment Plan: An agreement with a lender in which a borrower promises to make up any missed payments by sending one full payment and one partial payment each month until delinquent mortgage payments are caught up.
Point: A fee that is 1 percent of the loan amount.
Pre-approval: A guarantee that a lender will lend a potential buyer a fixed amount as long as the borrower buys a home by a certain time and house appraises for the amount of money for which the borrower qualifies.
Predatory Lending: A type of lender that falls between appropriate risk-based pricing and blatant fraud and combines certain products, terms, prices and practices.
Prepayment: Paying more each month than the amount of the mortgage loan payment to pay the loan off sooner and save money on interest charges.
Prepayment Penalty: A fee charged on some loans to a borrower who pays off a loan before it is due.
Prequalification: The process lenders use to calculate a potential buyers’ mortgage affordability, usually based on unverified information.
Principal: The outstanding balance of a loan, not including interest and other charges.
Promissory Note: A document in which the borrower promises to repay the loan. Also call “note.”
Property Tax: A tax charged by the local government and used to fund a variety of municipal services such as schools, police or street maintenance. Also called “real estate tax.”
Public Record: Information that is available to anyone, including credit reporting agencies, from court records. Includes information on liens, bankruptcy filings, judgment and deeds.
Purchase and Sale Agreement: A written contract signed by the buyer and the seller stating the terms and conditions under which a property will be sold.
Purchase Offer: A proposal to the seller of a house from a would-be buyer offering a stated amount for the house, often provided certain conditions (contingencies) are met.
Refinancing: The process of paying off one loan with the proceeds from a new loan secured by the same property.
Reverse Mortgage: A type of home loan in which a homeowner 62 years old or older can convert the equity in the home into cash.
Secondary Market: Investors that purchase residential mortgages originated by primary lenders, which in turn provides lenders with money for future lending.
Second Mortgage: A home loan that has rights subordinate to the first mortgage. In the case of a foreclosure, the second mortgage is repaid after the first mortgage.
Short Sale: Where the bank agrees to accept less than the amount due on a mortgage in order to make the sale of the house possible. May have tax implications for the borrower.
Single-Family Home: A type of house that is owned by one person or family, including the land on which it sits. The types of properties are usually detached.
Title: A legal document establishing the right of ownership in a property.
Truth-In Lending Act (TILA): A federal law that requires creditors to give complete and accurate information about the cost of credit to consumers and the terms of repayment.
Underwriting: The process of analyzing a borrower’s finances in order to approve or deny a loan.
