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Payment Change Date
The date when a new monthly payment amount takes effect on an
adjustable rate mortgage (ARM) or a graduated-payment mortgage (GPM).
Generally, the payment change date occurs in the month
immediately after the adjustment date.
Periodic Payment Cap
A limit on the amount that payments can increase or decrease
during any one adjustment period.
Periodic Rate Cap
A limit on the amount that the interest rate can increase or
decrease during any one adjustment period, regardless of how high
or low the index might be.
A long term mortgage, usually ten years or more. Also called
an "end loan."
Principal, Interest, Taxes and Insurance. Also called monthly
Pledged account Mortgage (PAM):
Money is placed in a pledged savings account and this fund
plus earned interest is gradually used to reduce mortgage
Points (loan discount points)
Prepaid interest assessed at closing by the lender. Each
point is equal to 1 percent of the loan amount (e.g., two points
on a $100,000 mortgage would cost $2,000).
Power of Attorney
A legal document authorizing one person to act on behalf of
The process of determining how much money you will be
eligible to borrow before you apply for a loan.
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.
A privilege in a mortgage permitting the borrower to make
payments in advance of their due date.
Money charged for an early repayment of debt. Prepayment
penalties are allowed in some form (but not necessarily imposed)
in many states.
Primary Mortgage Market
Lenders, such as savings and loan associations, commercial
banks, and mortgage companies, who make mortgage loans directly
to borrowers. These lenders sometimes sell their mortgages to the
secondary mortgage markets such as to FNMA or GNMA,
The amount borrowed or remaining unpaid. The part of the
monthly payment that reduces the remaining balance of a mortgage.
The outstanding balance of principal on a mortgage not
including interest or any other charges.
Principal, Interest, Taxes, and Insurance (PITI)
The four components of a monthly mortgage payment. Principal
refers to the part of the monthly payment that reduces the
remaining balance of the mortgage. Interest is the fee charged
for borrowing money. Taxes and insurance refer to the monthly
cost of property taxes and homeowners insurance, whether these
amounts that are paid into an escrow account each month or not.
Private Mortgage Insurance (PMI)
In the event that you do not have a 20 percent down payment,
lenders will allow a smaller down payment - as low as 3 percent
in some cases. With the smaller down payment loans, however,
borrowers are usually required to carry private mortgage
insurance. Private mortgage insurance will usually require an
initial premium payment and may require an additional monthly fee
depending on your loan's structure.