Option ARM - see Flexible payment ARM

Origination fees - The fees to be paid to the lender for the loan process activaties such as preparing loan amounts, making credit checks, inspecting property and so on. It is calculated as a particular percentage on the loan amount.

Partial prepayment - Making a payment towards the principal loan amount in part and not towards the full loan amount, prior to expiry of the loan period.

Payment adjustment interval - The interval in which payment changes occur on an ARM and it may or may not fall along with the interest rate adjustment period.

Payment increase cap - The maximum level to which payment on an ARM can rise at a payment adjustment date. Usually what is seen is a 7.5% payment increase cap.

Payment period - The period in which a borrower has to make regular loan payments, which is usually monthly.

Permanent buydown - A way to reduce the interest rates by paying down points on the mortgage.

Piggyback mortgage - This type of a mortgage helps a borrower to avoid putting down a large sum of money as down payment thereby bringing down the mortgage expense. It closes at the same time the first mortgage closes and is used to pay off the 20 % down payments that a borrower cannot pay in full.

PITI - This is a short form of Principal, Interest, Taxes and Insurance, which are the four elements that sum up borrower’s monthly mortgage payments. While the principal and interest payments go towards repayment of the loan borrowed, the payment towards taxes and insurance go into the escrow account held by the lender.

Points - They are expressed in terms of percent with respect to a mortgage wherein one pint is equal to one percent of a mortgage. Examples of points are discount points and origination points.

Portable mortgage - A mortgage that a borrower can transfer to another property. It was introduced in 2003 by the E*TRADE Mortgage.

Portfolio lender - A lender who holds the loans that come from them instead of selling them in the market.

Pre-approval or Qualification - A statement from a lender to the borrower stating that upon review of income and savings based on reported income and assets the amount the borrower is likely to receive. Sellers often insist on seeing this letter to validate the ability of the borrower to close the sale. This letter does not necessarily bind the lender to offer the loan – it is a first step only. An Approval letter is a stronger form of evidence.

Predatory lending - Mortgage scams that take advantage of borrower’s unawareness of the actual terms and conditions applicable to mortgages.

Prepayment - Payment made by a borrower towards the loan amount prior to the actual due date for such payment. Such a payment can be made in full or in part towards the loan principal.

Prepayment penalty - The charge levied by a lender for a borrower who wants to pay all or part of the loan amount borrowed before the loan period expires.

Primary residence - The home in which the borrower lives during the lifetime of the loan.

Principal - The balance owed on a loan.

Private mortgage insurance - This mortgage protects lenders from losses arising due to payment defaults by the borrower. Borrowers need to take this insurance if the loan -to-value percent higher than 80%.

Processing - The process of collecting and maintaining all information related to a mortgage transaction such as credit report, appraisal, verification of employment and assets, and so on.

Property flipping - This is a scheme in which homes are sold at progressively higher prices. Several notable scams use this scheme to inflate appraised values and defraud lenders who are left with over priced properties through foreclosure.

Purchase money mortgage - See seller financing.

Qualification ratios - This is the ratio of housing expense to borrower income, and/or housing expense plus other debt service to borrower income. It is typical for lenders to expect the ratio of housing expenses to borrower income not exceed a 36% limit. This sets the maximum house a person can afford.

Qualification requirements - These are requirements set by the lender, which a borrower must meet in order to be given a loan. The requirements are not as comprehensive as the underwriting requirements.

Rate caps - This is the maximum level to which rate adjustments on an ARM can happen. It is expressed alphabetically as a/b/c, wherein "a" denotes the maximum change that can happen in the first rate adjustment, "b" the maximum for subsequent adjustments, and "c" the maximum increase from the initial rate for over the entire period of the loan agreement.

Rate / point breakeven - This is the duration for which mortgage must be retained by a borrower in order to gain by a reduction in rate or pay point. For example if you refinance to lower your interest rate by 1% on a $500,000 mortgage and it costs you $5,000 in re-financing costs – then the breakeven point is 1 year. So only refinance if you plan on staying in your home for over 1 year.

Rate protection - Protection to a borrower against rise in interest rates from the time of loan application till the time the loan closes. Such a protection can be in the form of a lock in which the rates remain fixed till the loan closes or it can be a float-down, in which rates do not rise but can decreases if there is a fall in interest rates in the market.

Rate sheets - This is a daily listing of loan types that include interest rates and their respective points, which is provided by lenders to their employees or mortgage brokers. Mortgage brokers get many of these sheets from different wholesale brokers and can compare among them to get the best rates for you (and also the most premium for themselves).

Rebate - This is an offer from lenders to reduce settlement costs of a borrower and is also know as Negative points. Rebates are actually points that the lender pays on a loan which has a rate that is more than the rate applicable on a zero point loan

Refinance - A process of taking another mortgage to repaying an existing mortgage because the new mortgage offers a lower interest rate.

Required cash - This is the total amount needed to close the transaction on a home mortgage and is inclusive of expenses such a down payment, mortgage insurance premium, and other settlement charges.

RESPA –It stands for Real Estate Settlement Procedures Act. This act came into effect in 1975 and its aim is to protect borrowers by making certain disclosures mandatory and by preventing them from being scammed by expenses such as referral fees and kickbacks.

Retail lender – Lenders that offer mortgages directly to borrowers. Compare to wholesale lenders who use the services of mortgage brokers.

Reverse mortgage - This is a mortgage type that allows senior homeowners to get a home equity loan for which they need not make payments, until the event of death or sale of property or the borrower moves away from the home premises.

Right of rescission - This is the right of the borrower to cancel a loan, within a period of three days after loan application.