Mortgage Glossary - P

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P & I - Principal and Interest. This refers to the principal and interest portions of the monthly mortgage payment.

P & L / Profit and Loss - A statement of a businesses gross income, cost of goods, operating costs and net profit or loss.

P.I.T.I. - Principal, interest, taxes and insurance. The complete monthly cost associated with financing a property.

P.U.D. - Planned Unit Development. Property owned as a group, where individuals own the specific piece of land and structure they occupy, but also have a divided interest in a common area. A board, often referred to as a Homeowners Association, will govern the development.

Piggy Back Loan - Financing obtained, subordinate to the first mortgage, to facilitate closing the first mortgage. Also known as a Secondary Financing.

PMI Private Mortgage Insurance - Private mortgage insurance is a type of insurance that helps protect the mortgage company against losses due to foreclosure. This protection is provided by private mortgage insurance companies and allows mortgage companies to accept lower down payments than would normally be allowed. Private mortgage insurance also enables mortgage companies to grant loans that would otherwise be considered too risky to be purchased by third party investors like the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC). The ability to sell loans to these investors is critical to maintaining mortgage market liquidity, which in turn, allows mortgage companies to continue originating new loans.  In general you can choose other type of mortgage program to avoid MI and reduce your monthly payments or with same payment amount you can buy "more of a house".

PMI Payment Options - Private mortgage insurance can be paid on either an annual, monthly or single premium plan. Premiums are based on the amount and terms of the mortgage and will vary according to loan-to-value ratio, type of loan, and amount of coverage required by the mortgage company. Under an annual plan, an initial one year premium is collected up front at closing, with monthly payments collected along with the mortgage payment each month thereafter. Monthly plans allow a borrower to pay only 1 or 2 months worth of premium at closing, and then on a monthly basis along with the regular mortgage payment. Under a single premium plan, the entire premium covering several years is paid in a lump sum at closing. Typically, homebuyers choose to add the amount of the mortgage insurance premium to the loan amount. By doing this, homebuyers can reduce their closing costs and increase their interest deduction.

PMI Cancellation - The homebuyer can usually cancel mortgage insurance after he or she has at least 20 percent equity in the home. Borrowers should contact their servicer to find out the procedure for canceling mortgage insurance when they think they have achieved 20 percent equity. Guidelines for canceling private mortgage insurance are set by investors. Typically, investors will require an appraisal on  the property. The servicer can recommend qualified local appraisers.

Points - A point is equal to one percent of the principal amount of a mortgage, see also Discount Points.

Power of Attorney - An authority by which one person enables another to act on his or her behalf. Power of attorney can be limited to specific areas or be general in some cases.

PRE-Approval - The Buyer has actually begun the application process and an underwriter has approved their income, funds and credit. Beware of any conditions on the approval.

Prelim. / Preliminary Title Report - The title report generated at the beginning of the application process. It tells the mortgage company what liens are on the property and gives advice as to what will need to be done to gain clear title prior to recording the trust deed.

Prepaid Interest - Charge The portion of interest, collected at loan closing, which covers the time period between funding and the beginning of the first 30-day period covered by the first payment. For example, if the loan closed on 2/15, the first payment due on 4/1 would pay interest from 3/1 to 4/1. The prepaid interest would cover the period from 2/15 to 2/28.

Prepaids - Expenses necessary to create an escrow account or to adjust the seller's existing escrow account. Can include taxes, hazard insurance, private mortgage insurance and special assessments.

Prepayment Penalty - Money charged for an early repayment of debt. Prepayment penalties are allowed in some form (but not necessarily imposed) in 36 states and the District of Columbia.

Prepayment - A privilege in a mortgage permitting the borrower to make payments in advance of their due date.

PRE-Qualified - Buyer has discussed their financial situation with a loan expert. No attempt has been made to verify the validity of any of the borrowers information. PRE-Qualification is only an indication of what the buyer should qualify for.

Principal - The amount of debt, not counting interest, left on a loan.

Private Mortgage Insurance - In the event that you do not have a 20 percent down payments, lenders will allow a smaller down payment-as low as 5 percent in some cases. With the smaller down payments loans, however, borrowers are usually required to carry private mortgage insurance. Private mortgage insurance will require an initial premium payment of 1.0 percent to 5.0 percent of your mortgage amount and may require an additional monthly fee depending on your loan's structure. On a $75,000 house with a 10 percent down payments, this would mean either an initial premium payment of $2,025 to $3,375, or an initial premium of $675 to $1,130 combined with a monthly payment of $25 to $30. (PMI)

Purchase Agreement - The agreement made between the buyer and seller of a property, containing the purchase price and contingencies of the sale.