Payment
The periodic amount of money to be paid by the borrower to reduce the balance of a loan. Sometimes referred to as principal and interest or P& I.

Payment cap
A limit on how much a monthly payment can increase at any one time. Some adjustable-rate mortgages have payment caps in addition to annual (or semi-annual) interest rate caps and lifetime interest rate caps. Payment caps don't limit the amount of interest charged and may cause negative amortization. Also called a cap.

P and I
An acronym meaning principal and interest. Principal and interest accounts for the majority of your mortgage payment, but doesn't include escrow payments for taxes, insurance, and any other costs that are paid monthly, or fees that periodically come due.

Per diem interest
The amount of interest that accrues daily on a loan. This is calculated by multiplying the outstanding loan balance by the annual rate of interest and then dividing the result by 365.

PITI
An acronym for principal, interest, taxes and insurance. Also referred to as the monthly housing expense.

Planned Unit Developoment (PUD)
A comprehensive development plan for a large land area. A PUD usually includes residences, roads, schools, recreational facilities, commercial, office and industrial areas. Also, a subdivision having lots of areas owned in common and reserved for the use of some or all of the owners of the separately owned lots.

PMI
An acronym for private mortgage insurance. If your down payment is less than 20%, most lenders will require you to get private mortgage insurance. This is insurance that protects the lender if you default on your loan. This insurance usually costs from 0.15% to 2.5% of the loan amount. Also called mortgage insurance.

Points
Each point is equal to 1% of the loan amount (for example, two points on a $100,000 mortgage would cost $2,000). Points, if charged, are usually collected at settlement with all other closing costs. Negative points reflect the amount that will be credited to you and reduce the amount of closing costs you will pay. Also referred to as discount points.

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

Prepaids
The expenses that are usually paid in advance, such as escrows for taxes and insurance, which are paid at closing.

Prepaid interest
The interim interest that's collected at closing of a first mortgage, covering the period from the date of disbursement to the first of the next month.

Prepayment penalty
A penalty assessed by some lenders if a loan is paid off early. This is a lump-sum amount due and payable in addition to the loan balance, and is usually limited to the early years of a mortgage. Not all loans have prepayment penalties.

Prequalification
The process of providing financial and other information (such as employment history and proposed collateral) by a prospective borrower in conjunction with determining how much loan the borrower can obtain for the purchase of a home.

Previous balance
The amount you owed at the end of the previous payment period. If your credit card company calculates your finance charge using the previous balance method, you pay interest on that amount. Any payments, credits or new purchases made during the current payment period are not counted.

Primary applicant
The applicant whose name appears first on the application.

Primary residence
This is the home in which a borrower resides most of the time.

Prime rate
The interest rate that banks charge to their most creditworthy customers on short-term loans.

Principal
The amount of money borrowed on a loan.

Processing
The preparation of a mortgage loan application and supporting documentation for consideration by a lender or insurer.

Processing fee
A fee charged to cover the administrative costs of processing your loan request.

Property tax
A fixed percentage based on the appraised value of your home that you pay to the county in which the home is located. The specific percent varies dramatically from county to county in every part of the country. You pay this tax annually, semi-annually or as part of your monthly mortgage payments. Depending on when you actually close your loan, some of this property tax may be due at the time of closing. The local county assessor's office can give you the rate for your county.

Purchase Contract (Agreement/Offer)
An agreement between a buyer and seller of real property, setting forth the price and terms of the sale. Also known as a sales contract.