Mortgage Definitions (N - P)

Negative Amortization
When your onthly payments arenot large enought to pay all the interst due on the loan. This unpaid interst is added to the unpaid balance of the loan. The home buyer ends up owing more than the original amount of the loan.

Net Effective income
The borrower's gross income minus federal income tac

Non Assumption Clause
A statement in a mortgage contract forbidding the assumption of the mortgage without the prior approval of the lender

Note
A legal document that obligates a borrower to repayu a mortgage loan at a stated interst rate during a specified period of time. The regualtory and supervisory agency for federally chartered savings insutuions. Formally known as Federal Home Loan Bank Board

One Year Adjustable Rate Mortgage
Mortgage where the annual rate changes yearly. The rate is usually based on movements of a published index plus a specified margin, chosen by the lender

Orgination Fee
The fee charged by a lender to prepare loan documents, make credit checks, inspect and sometimes appraise a property: usually computed as a percentage of the face value of the loan

Owner Financing
A property purchase transaction in which the party selling the property provides all or party of the financing

Payment Change Date
The date when a new monthly paymetn amount takes effect on an adjustable rate mortgage(ARM) or a graduated-payment mortgage (GPM). Generally, the payment change date occurs in teh 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 interst rate can increase or decrease during anyo one adjustment period, regardless of how high or low the index might be

Permanent loan
A long term mortgage, usuallyu ten years or more. Also called an "end loan"

PITI
Principal, interest, taxes and insurance. Also called monthly housing expense

Pledged Account Mortgage (PAM)
Money is placed in a pledged savings account and this fund plus earned interstr is gradually used to reduce mortgage payments

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)

Pover of Attorney
A legal document authorizing one person to act on behalf of another

Preapproval
A legal document authorizing one person to act on behalf of another

Prepaid Expenses
Necessary to create an escrow accounmt or to adjust the seller's existing escrow account. Can include taxes, hazard insurance, private mortgage insurance and special assessmetns

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

Prepayment Penalty
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 makrets such as FNMA or GNMA

Principal
The amopunt borrowed or remaining unpaid. The part of the monthly payments that reduces the remaining balance of a mortgage.

Principal Balance
The outstanding balance of princpal on a mortgage not including interst or any other charges

Principal, Interest, Taxes, and Insurance (PITI)
The four componets of amonthly mortgage payment. Principal refers to th tpart of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing monay. Taxes and insurance, whether thse amounts are paid into an escrow account each month or not

Private Mortgage Insurance (PMI)
In the ecent 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 priovate 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