Mortgage Glossary part 3 |
MORTGAGE: A financial arrangement wherein an individual borrows money to purchase real property and secures the loan with the property as collateral. MORTGAGE INSURANCE: A policy that fulfills that obligations of a mortgage when the policy holder defaults or is no longer able to make payments. NOTE: A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.PLANNED UNIT DEVELOPMENT (PUD): A coordinated, real estate development where common areas are shared and maintained by an owner's association or other entity. PRE-APPROVAL: The process of applying for a mortgage loan and becoming approved for a certain amount at a certain interest rate before a property has been chosen. Pre-approval allows the borrower greater freedom in negotiations with sellers. PREPAYMENT: Payment made that reduces the principal balance of a loan before the due date and before the loan has become fully amortized. PRE-QUALIFICATION: Less formal that pre-approval, pre-qualification usually means a written statement from a loan officer indicating his or her opinion that the borrower will be able to become approved for a mortgage loan.PRINCIPAL: The amount owed on a mortgage which does not include interest or other fees. PRINCIPAL, INTEREST, TAXES, AND INSURANCE (PITI): The most common constituents of a monthly mortgage payment. PURCHASE AGREEMENT: A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.QUITCLAIM DEED: A legal document which transfers any ownership an individual has in a piece of property. Often used when the amount of ownership is not known or is unclear. QUALIFYING RATIOS: Two ratios used in determining credit worthiness for a mortgage loan. One is the ratio of a borrowers monthly housing costs to monthly income. The other is a ratio of all monthly debt to monthly income. |
