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P A legal document that authorizes another person to act on one’s behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time. prearranged refinancing agreement A formal or informal arrangement between a lender and a borrower wherein the lender agrees to offer special terms (such as a reduction in the costs) for a future refinancing of a mortgage being originated as an inducement for the borrower to enter into the original mortgage transaction. preforeclosure sale A procedure in which the investor allows a mortgagor to avoid foreclosure by selling the property for less than the amount that is owed to the investor. prepayment Any amount paid to reduce the principal balance of a loan before the due date. Payment in full on a mortgage that may result from a sale of the property, the owner's decision to pay off the loan in full, or a foreclosure. In each case, prepayment means payment occurs before the loan has been fully amortized. prepayment penalty A fee that may be charged to a borrower who pays off a loan before it is due. pre-qualification The process of determining how much money a prospective home buyer will be eligible to borrow before he or she applies for a loan. prime rate The interest rate that banks charge to their preferred customers. Changes in the prime rate influence changes in other rates, including mortgage interest rates. principal The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage. More principal balance The outstanding balance of principal on a mortgage. The principal balance does not include interest or any other charges. See remaining balance. principal, interest, taxes and insurance (PITI) The four components of a monthly mortgage payment. Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing money. Taxes and insurance refer to the amounts that are paid into an escrow account each month for property taxes and mortgage and hazard insurance. private mortgage insurance (MI) Mortgage insurance that is provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults. Most lenders generally require MI for a loan with a loan-to-value (LTV) percentage in excess of 80 percent. promissory note A written promise to repay a specified amount over a specified period of time. public auction A meeting in an announced public location to sell property to repay a mortgage that is in default. PUD (Planned Unit Development) A project or subdivision that includes common property that is owned and maintained by a homeowners' association for the benefit and use of the individual PUD unit owners. purchase and sale agreement A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold. purchase money transaction The acquisition of property through the payment of money or its equivalent.
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