Lien – A legal claim against personal property. When a borrower has a mortgage on a home, the lender will hold a lien against the property in case of default. The mortgage itself acts as the lien.
Mortgage banker – This is the person or firm who originates and services mortgage loans.
Mortgage broker – A person who acts as an agent and brings borrowers and lenders together. A mortgage broker does not service loans. Mortgagee- The lender in a loan transaction.
Mortgagor – A borrower in a loan transaction.
Negative Amortization – Refers to a situation when the payment the borrower makes on the loan is not enough to cover both the interest owned and the balance. The outstanding interest is added back into the loan.
Origination fee – This is the fee charged by a lender in order to cover the costs associated with taking the application on the loan, processing the loan and closing the loan. In most cases, the origination fee is a percentage of the amount of the loan.
PITI- This acronym refers to Principal, Interest, taxes and insurance.
Point – Refers to a unit of measurement used for various loan charges. One point typically equals 1 percent of the loan amount.
Prequalification – Refers to the process many borrowers choose where they consult a lender about the amount of money they are qualified to borrow before they actually select a home to purchase.
Prepayment penalty – A financial penalty imposed when a borrower pays off the loan early. This fee is intended to reimburse the lender for any lost interest due to the loan being paid off early.
Prime rate – This is the best interest rate normally given by banks to customers with excellent credit scores.
Re-mortgage – Refers to the process by which a borrower pays off the first mortgage loan by obtaining financing from a second lender. This is usually done in order to obtain better interest rates, pay off a mortgage loan early or reduce monthly mortgage payments.
Secondary mortgage market – Refers to the purchase and sale of existing mortgages. This market is intended to provider greater leverage for lenders and increased availability of funds for borrowers.
Underwriting – Refers to the decision making process lenders use to review all the information on a borrower and a proposed property.