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Mortgage-Glossary

Mortgage Glossary

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TermDefinition
Payment Cap Limit on the amount by which a borrower’s ARM payments may increase, regardless of rise in interest rates. This may result in negative amortization.
Payment Change Date Dates upon which the payment is subject to change. Products featuring negative amortization typically will include a payment change date which differs from the interest rate change date in frequency.
Per Diem Interest Interest calculated per day. Depending on the day of the month that the loan closes, you will have to pay interest from the closing date through the end of the month
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 interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might be
Permanent Loan A long-term mortgage of 10 or more years.
PITI Principal balance plus interest, taxes and insurance.
PITI Reserves A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months (usually three)
Points A point is equal to one percent of the principal amount of your mortgage. For example, if you get a mortgage for $165,000 one point means $1,650 to the lender.Points usually are collected at closing and may be paid by the borrower or the home seller, or may be split between them.
Power of Attorney Legal document authorizing one person to act on behalf of another

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