Mortgage Glossary
There are a lot of unfamiliar terms that get tossed around during the mortgage process. But don't worry, we've put together this glossary to help you get a better grasp of any terms that may be less than clear.
P
Plat Drawing & Conservation Fee
A fee charged by title companies in some states for obtaining a map or chart of a lot, subdivision or community drawn by a surveyor showing boundary lines, buildings, improvements on the land, and easements. This drawing is required to obtain title insurance. For our comparison purposes, the plat drawing and conservation fee is considered to be a third party fee. Some lenders may include this fee in the cost of the title insurance.
Plat Registration
A fee charged by title companies in some states to review the registration of a public record containing maps of land, showing the division of the land into streets, blocks, and lots and indicating the measurements of the individual parcels. For our comparison purposes, the plat registration fee is considered to be a third party fee. Some lenders may include this fee in the cost of the title insurance.
Points
Fees that are collected by the lender in exchange for a lower interest rate. Commonly called discount points, each point is equal to 1% of the loan amount. For our comparison purposes, a discount point is considered to be a lender fee. To determine if it is wise to pay discount points to obtain a lower rate, you must compare the up front cost of the points to the monthly savings that result from obtaining the lower rate.
Power of Attorney
A written legal instrument that authorizes another person to act on one's behalf. A power of attorney can grant either complete or limited authority.
Pre-foreclosure Sale
A process in which the lender allows a borrower to avoid foreclosure by selling the property for less than the amount that may be owed to the lender.
Pre-qualification
Procedure to determine how much money a potential homebuyer will be eligible to borrow prior to actually applying for a loan.
Prepaids
Expenses of property ownership or expenses incurred while obtaining a mortgage that must be paid in advance. Prepaids typically include real estate taxes and hazard insurance.
Prepayment
Any amount that is paid to reduce the principal balance, not interest, of a loan before the due date.
Prepayment Penalty
A monetary penalty charged by a lender if all or part of a loan is paid off before it is due.
Prime Rate
The interest rate that banks charge to their best customers for short-term loans. Changes in the prime rate can influence changes in other interest rates.
Principal
The actual balance, excluding interest, of a mortgage loan. Also refers to the amount of the monthly mortgage payment that will be applied to the actual balance.
Principal & Interest
The payment required to repay a mortgage in accordance with its terms. Sometimes referred to as "P&I".
Principal Balance
The outstanding balance of principal on a loan. Principal does not include interest or fees.
Private Mortgage Insurance
Insurance provided by a private company to protect the mortgage lender against losses that might be incurred if a loan defaults. The cost of the insurance is usually paid by the borrower and is most often required if the loan amount is more than 80% of the home's value. Sometimes referred to as mortgage insurance.
Processing/Administration Fee
A fee charged by a lender to cover the administrative costs of processing a loan request. For our comparison purposes, a processing or administration fee is considered to be a lender fee.