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Loanfactz DefinitionsGlossary of Legal Terms, Loan Terms and Home Construction, Repair and Maintenance Definitions. Some words have more than one meaning. Only those meanings relating to this site will be used.
Payment The process of paying money that is owed each month, such as a monthly mortgage payment, or a monthly car payment. PITI P=Principal I=Interest T=Real Estate Taxes I=Homeowner's Insurance PITIO P = Principal I = Interest T = Real Estate Taxes (Property Taxes) I = Homeowner's Insurance O = Other Monthly Non Housing Costs PLUS Loan (For Parents) Parents can borrow a PLUS Loan to help pay your education expenses if you are a dependent undergraduate student enrolled at least half time in an eligible program at an eligible school. PLUS Loans are available through the Federal Family Education Loan (FFEL) Program and the William D. Ford Federal Direct Loan (Direct Loan) Program. Your parents can get either loan, but not both, for you during the same enrollment period. They also must have an acceptable credit history. More about Plus Loan (for parents) PMI (Private Mortgage Insurance) PMI is Private Mortgage Insurance, also called Mortgage Insurance (MI). PMI is insurance, required by lenders, needed for a mortgage loan with a low down payment, usually a down payment less than 20 percent of the price of the home, or in a refinancing, when the amount financed is greater than 80 percent of the appraised value of the home. PMI protects lenders from the risk of default and foreclosure. PMI is provided by a private mortgage insurance company, is usually paid by the borrower (you), and is included in the mortgage payments the borrower makes. More about PMI (Private Mortgage Insurance) Points Points are fees paid to the lender or broker for the loan and are often linked to the interest rate, usually the more points you pay, the lower the rate. A point is equal to one percent of the principal amount of your mortgage. For example, if you get a mortgage for $65,000, one point means you pay $650 to the lender. Ask for points to be quoted to you as a dollar amount, rather than as the number of points, so that you will actually know how much you will have to pay. Lenders frequently charge points in both fixed rate mortgages and adjustable rate mortgages in order to increase the yield on the mortgage and to cover loan closing costs. These points usually are collected at closing and may be paid by the borrower or the home seller, or may be split between them. Check your local newspaper for information about rates and points currently being offered. Pre-Approval Letter A letter from a mortgage lender indicating that you qualify for a mortgage of a specific amount. It also shows a home seller that you are a serious buyer. Pre-Approved Loan A loan the lender issues to the borrower "before" buying a home or auto. These loans are usually valid for a limited time only. Pre-approved only means that a potential customer has passed a preliminary credit-information screening. Neither a "pre-approved" nor a "pre-qualified" are seen as absolute loan commitments. To give yourself the negotiating advantage, always get a pre-approved loan. Pre-Qualification Letter A letter from a mortgage lender that states that you are pre-qualified to buy a home but does not commit the lender to a particular mortgage amount. Predatory Lending Abusive lending practices that include making a mortgage loan to an individual who does not have the income to repay it or repeatedly refinancing a loan, charging high points and fees each time and packing credit insurance on to a loan. Read more about Predatory Lending Premium The amount of money you have to pay each month that an insurance company charges for insurance coverage. Prepayment Penalty A lender's charge to the borrower for paying off the loan before the end of the term. Always check with the lender if you can pay extra payments or pay the entire loan off early (if you choose) without a penalty. Prime Loan Prime loans are typically offered to borrowers who are creditworthy with strong credit histories. Prime Rate Prime rate is the interest rate leading banks charge their most creditworthy customers. Principal The amount of money borrowed or the amount of the loan that has not yet been paid back to the lender. This does not include the interest you will pay to borrow that money. The principal balance (sometimes called the outstanding or unpaid principal balance) is the amount owed on the loan at any given time. Promissory Note A legally binding contract you sign when you get a loan. This legal contract lists the conditions under which you are borrowing and the terms under which you agree to pay back the loan, for example, you borrow a specified sum of money at a specified interest rate to be paid over a fixed period of time. Also called a mortgage note or a note. Property Tax A tax charged by local government and used to fund municipal services such as schools, police, or street maintenance. The amount of property tax is determined locally by a formula, usually based on a percent per $1,000 of assessed value of the property. Property Tax Deduction The United States tax code allows homeowners to deduct the amount they have paid in property taxes from there total income. |
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