Washington State Department of Financial Institutions

Glossary of Terms

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P

Partial Claim - A loss mitigation option offered by the FHA that allows a borrower, with help from a lender, to get an interest-free loan from HUD to bring their mortgage payments up to date.

Payee - The person to whom a check or other obligation is payable.

Payroll Deduction - Allows members to send part of their pay, retirement, insurance or investment checks directly to any SECU account.

Periodic Rate - A rate of finance charge imposed for a given amount of time.

Personal Identification Number (PIN) - A member's secret identification number that must be used when accessing an automated teller machine (ATM).

PITI - Acronym for (Principal + Interest + Taxes + Insurance) = the four elements of a monthly mortgage payment; payments of principal and interest go directly towards repaying the loan while the portion that covers taxes and insurance goes into an escrow account to cover the fees when they are due.

Point-Of-Sale Terminal (POS) - Computer terminal that enables a bank customer to access account funds at the place a sale is made, usually a supermarket or retail store.

Points (Loan Discount Points) - Fees described as percentages. For example, "2 points" equals 2% of the loan amount. (e.g., two points on a $100,000 mortgage would cost $2,000).

Portfolio - The collection of all of your investments.

Postdated Check - A check dated in the future. The check is not acceptable for processing until that date has been reached.

Power of Attorney - A legal document authorizing a person to act as an agent for another person.

Pre-Approval Letter - A letter from a mortgage lender indicating that you qualify for a mortgage of a specific amount. It also shows a home seller that you are a serious buyer.

Pre-Approval - Where the consumer actually applies for a loan before s/he has found the house s/he wants to buy. The lender guarantees the consumer a fixed loan amount as long as s/he buys within a certain time period and meets the qualification requirements at the time of purchase. This is much more convincing to a seller than a Pre-qualification.

Preauthorized Payments - Free service which provides members with a convenient method of paying fixed amount, recurring bills; primarily mortgage payments and insurance premiums. Funds are automatically withdrawn from the member's Share Draft account each month to honor these payments. The combined account statement serves as the record of payment.

Predatory Lender - Abusive lending practices that include making a mortgage loan to an individual who does not have the income to repay it; or charges higher interest rates that include unnecessary fees and charges, and/or does not fully disclose the loan terms, or writes the terms in such a way that ensures an unreasonable amount of profit for the lender.

Pre-Foreclosure Sale - Allows a defaulting borrower to sell the mortgaged property to satisfy the loan and avoid foreclosure.

Premium - An amount paid on a regular schedule by a policyholder that maintains insurance coverage.

Prepayment Penalties - Charges assessed to a borrower if an account is paid off before the due date.

Pre-Payment Penalty - A fee charged by a lender if the borrower pays the loan off early, generally to make up for interest the lender anticipated earning but will not earn as a result of the payoff. Not all loans have a prepayment penalty. Sometimes a loan will have an optional prepayment penalty in exchange for a lower rate or fee.

Pre-Payment - Paying on principal, or paying above the minimum payment required by the lender. In the beginning years of the loan, the minimum payment is usually all interest. Anything added to that payment would go to paying off the principal. The more the borrower prepays, the shorter the term of the loan will be. Be sure to check if there are any Prepayment Penalties.

Pre-Qualification letter - A letter from a mortgage lender that states that you are pre-qualified to buy a home but does not commit the lender to a particular mortgage amount.

Pre-Qualification - A meeting with a lender or mortgage broker to determine how much money the lender would probably be willing to lend to the borrower and how much the monthly payments would be. This is usually a free service with no guarantees.

Primary Residence/ Principal Residence - The residence of the borrower which is intended to be occupied on a permanent basis.

Prime Rate - The interest rate, that is charged by commercial financial institutions for loans made to those larger business borrowers that have the highest credit ratings, it is usually the best rate available.

Principal - The amount of money borrowed to buy your house or the amount of the loan that has not yet been paid back to the lender. This does not include the interest you will pay to borrow that money. The principal balance (sometimes called the outstanding or unpaid principal balance) is the amount owed on the loan at any given time. It is the original loan amount minus the total repayments of principal you have made to date.

Private Mortgage Insurance (PMI) - Insurance provided by non-government insurers that protect lenders against loss if a borrower defaults. This insurance is usually required when a borrower makes less than a 20% down payment. When the borrower's equity in the property equals 20%, s/he may request the insurance to be cancelled.

Promissory Note (Loan Note) - This document represents the legal, contractual obligation of the debtor. The principal, interest rate, term and payment schedule, and default and delinquency provisions are reflected in this document.

Promissory Note - A written promise made by one person to pay another person a certain sum of money on demand or at a future date.

Property Appreciation - see Appreciation.

Prospectus - A document that describes a securities offering or the operations of a mutual fund.

Purchase Money Mortgage - The mortgage loan obtained to purchase a home.

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