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Terminology
Here Are Some Helpful Terms Used Throughout The Real Estate,
Mortgage, and Title Processes.
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Parcel |
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A separately assessed for tax purposes lot or piece of real property.
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Payment Schedule |
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The method for disclosing your payment schedule varies by loan type. For fixed rate loans, this section indicates what your required monthly payment will be throughout the life of your loan. The payment schedule for VA, FHA, one-time MIP and uninsured conventional loans should also indicate a fixed monthly payment. The payment schedule for fixed-rate insured loans may gradually decrease over time due to a declining insurance premium. For adjustable rate loans, the payment schedules will vary by loan type and are based on conservative assumptions of future interest rates. |
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PITI |
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Principal, Interest, Taxes and Insurance. These components are usually all included in the monthly mortgage payment unless escrows are waived.
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Planned Unit Development (PUD) |
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A planned unit development (PUD) is a project or subdivision that consists of common property and improvements that are owned and maintained by an owner's association for the benefit and use of the individual units within the project. For a project to qualify as a PUD, the owners' association must require automatic, non-severable membership for each individual unit owner, and provide for mandatory assessments. |
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Plat |
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A map or chart of a lot, subdivision or community drawn by a surveyor showing boundary lines, buildings, improvements on the land, and easements.
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Points |
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Sometimes called "discount points". A point is one percent of the amount of the mortgage loan amount. (eg: For a $50,000 loan, one point is $500). Points are interest paid in advance and allow a borrower to buy a lower mortgage rate, which results in a lower payment. For borrowers who are not able to cover the cost of points in addition to the other costs of buying a home, or for those who do not plan to stay in the house for long, 0 points are preferred. Buyers are prohibited from paying points on HUD or VA guaranteed loans (sellers can pay, however). On a conventional mortgage, points may be paid by either buyer or seller or split between them.
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Power of Attorney |
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A legal document that authorizes another person to act on one’s behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.
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Prepaid Interest |
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Prepaid Interest is interest on your new mortgage that is paid at closing. The amount of interest will vary from 0 to 30 days, as it is calculated from the date of closing to month end. For example, if the loan closed on March 20th, prepaid interest would be owed from March 20th through March 31st. A normal monthly principal and interest payment would cover interest due for the previous month. If the loan closed on March 20th, the first payment would be due May 1st. The May 1st payment would cover interest due for the month of April. |
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Prepayment |
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Payment of mortgage loan, or part of it, before due date. Mortgage agreements sometimes restrict the right of prepayment either by limiting the amount that can be prepaid in any one year or charging a penalty for prepayment. Lenders who impose prepayment penalties will charge borrowers a fee if they wish to repay part or all of their loan in advance of the regular schedule. The Federal Housing Administration does not permit such restrictions in FHA insured mortgages. Prepayment penalties are typically only found on bad credit mortgage loans.
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Prepayment Penalty |
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A prepayment penalty is a fee that is charged if the loan is paid off earlier than the specified term of the loan. Depending on your loan program and applicable state law, you may or may not incur a prepayment penalty. Contact your loan officer for specific information. |
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Principal |
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The basic element of the loan as distinguished from interest and mortgage insurance premium. In other words, principal is the amount upon which interest is paid.
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Private Mortgage Insurance (PMI) |
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An insurance policy the borrower buys to protect the lender from non-payment of the loan. This is required for loans where the borrower puts less than 20% down. With a new law that took effect in 1999, PMI will automatically be removed when the loan is paid down to 78% LTV, subject to the borrowers good credit history. Read about different PMI options. |
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Processing, Underwriting, Courier and Document Fees |
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Charges for the lender's services associated with making the loan.
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Property Taxes |
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The taxes assessed on the property by the local government (e.g. city, county, village or township) for the various services provided to the property owner. Such services may include police and fire department services, garbage pick up and snow removal. |
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Pro-rations |
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The allocation of expenses, such as taxes between buyer and seller at closing based on the number of days the property is owned during the month of closing. The seller has prepaid taxes for a year, and is reimbursed for that part of the year he will not own the house.
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Purchase Agreement |
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See Agreement of Sale |
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