Glossary of Mortgage Terms

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P&I

Abbreviation for principal and interest.

payment cap

See: cap.

PITI

Abbreviation for principal, interest, taxes and insurance.

points

Charges levied by the lender based on the loan amount. Each point equals one percent of the loan amount; for example, two points on a $100,000 mortgage is $2,000. Discount points are used to buy down the interest rate. Points can also include a loan origination fee, which is usually one point.

pre-qualification

Tentative establishment of a borrower's qualification for a mortgage loan amount of a specific range, based on the borrower's assets, debts, and income.

prime rate

The interest rate commercial banks charge their most creditworthy customers.

principal

The amount of the entire mortgage loan, not counting interest. Also, as a part of PITI, the amount of the monthly mortgage payment which does not include the interest, insurance, and taxes.

private mortgage insurance (PMI)

See: mortgage insurance.

property appraisal

See: appraisal.

property tax

The amount which the state and/or locality assesses as a tax on a piece of property.

prorate

To proportionally divide amounts owed by the buyer and the seller at closing.