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.