Real Estate Glossary

P

Package Mortgage
Mortgage covering both real and personal property.

Partnership
A legal business entity in which two or more persons or business entities join capital, expertise and/or labor in a proportionate manner. Profits and losses are passed through to the partners. The partnership pays no income taxes.

Payment Cap
A provision in some adjustable-rate mortgages (ARMs) which limits the amount by which the payment may increase, regardless of increases in the interest rate. Payment caps can lead to negative amortization.

Percent Improvement
The percentage of the total assessed value of a property that is made up of improvements. For instance, a $300,000 property that has a land value of $200,000, has a percent improvement of 33% ($100,000).

Permanent Financing
A mortgage loan placed on a newly built property after completion of construction.

Pest Infestation Report
A report prepared by a qualified individual or company that determines the extent of any insect or other pest infestation which has damaged or poses damage to a parcel of real property.

Physical Depreciation
The losses of value to property due to wear and tear, disintegration or action of the elements.

PITI
The components of a monthly mortgage payment-Principal, Interest, Taxes, and Insurance.

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 equal the amount that the borrower would have to pay for PITI for a predefined number of months.

Planned Unit Development (PUD)
A subdivision of five or more individually owned lots with one or more other parcels owned common or with reciprocal rights in one or more other parcels.

Plat
A map or chart of a lot, subdivision or community, showing boundary lines, buildings and easements.

Portfolio Loan
A loan made by a bank, savings and loan, or credit union that is retained as an investment and not sold in the secondary market to investors.

Power of Attorney
A legal document which authorized one individual or entity to act on behalf of another.

Prepaid Interest
The interest charged to borrowers at loan closing to pay for the cost of borrowing for a partial month. Covers the period of time between the closing date and the date scheduled interest begins to accrue.

Prepaids
Those expenses of property which are paid in advance of their due date and will usually be prorated upon sale, such as taxes, insurance, rent, etc.

Prepayment
Full payment of the principal before the due date, occurs when a property is sold or the borrower refinances the existing loan.

Prepayment Penalty
A charge imposed by a mortgage lender on a borrower who wants to pay off part or all of a mortgage loan in advance of schedule.

Pre-qualification
The process of providing an informal, non-binding opinion of how much money a prospective borrower will be eligible to borrow.

Primary Mortgage Market
The process of obtaining a real estate loan, including the consumer's completion of a loan application, validation of the credit and property information, loan underwriting by the lender and closing of a mortgage loan.

Primary Residence
Considered the permanent location of residency.

Principal
Amount of debt, not including interest. The face value of a note or mortgage.

Private Mortgage Insurance (PMI)
Insurance provided by nongovernment insurers that protect lenders against loss if a borrower defaults. Fannie Mae generally requires private mortgage insurance for loans with LTV percentages greater than 80%.

Processing
The preparation of a mortgage loan application and supporting documentation for consideration by a lender or mortgage insurer.

Property Tax
A tax levied by the local municipality or county on real and personal property.

Property Tax Prorations
Expenses such as taxes that are divided to the date of settlements between buyer and seller at closing. Interest is sometimes prorated when a mortgage loan is closed.

Purchase Money Mortgage
A mortgage obtained by the buyer to provide a portion of the funds needed to purchase real property.