Mortgage Glossary (I - P)
Impound
The portion of a borrower's monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due.
Interim Financing
A construction loan made during completion of a building or a project. A permanent loan usually replaces this loan after completion.
Investor
A money source for a lender.
Jumbo Loan
A loan which is larger than the limits set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Because jumbo loans cannot be funded by these two agencies, they usually carry a higher interest rate.
Lien
A claim upon a piece of property for the payment or satisfaction of a debt or obligation.
Loan-to-Value Ratio
The relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage.
Margin
The amount a lender adds to the index on an adjustable rate mortgage to establish the adjusted interest rate.
Market Value
The highest price that a buyer would pay and the lowest price a seller would accept on a property. Market value may be different from the price a property could actually be sold for at a given time.
Mortgage Insurance
Money paid to insure the mortgage when the down payment is less than 20 percent. See private mortgage insurance, FHA mortgage insurance.
Mortgagee
The lender.
Mortgagor
The borrower or homeowner.
Negative Amortization
Occurs when your monthly payments are not large enough to pay all the interest due on the loan. This unpaid interest is added to the unpaid balance of the loan. The danger of negative amortization is that the home buyer ends up owing more than the original amount of the loan.
Net Effective Income
The borrower's gross income minus federal income tax.
Non Assumption Clause
A statement in a mortgage contract forbidding the assumption of the mortgage without the prior approval of the lender. Note: The signed obligation to pay a debt, as a mortgage note.
Office of Thrift Supervision
The regulatory and supervisory agency for federally chartered savings institutions. Formally known as Federal Home Loan Bank Board.
Origination Fee
The fee charged by a lender to prepare loan documents, make credit checks, inspect and sometimes appraise a property; usually computed as a percentage of the face value of the loan.
Permanent Loan
A long term mortgage, usually ten years or more.
Pledged account Mortgage
Money is placed in a pledged savings account and this fund plus earned interest is gradually used to reduce mortgage payments.
Points
Prepaid interest assessed at closing by the lender. Each point is equal to 1 percent of the loan amount.
Power of Attorney
A legal document authorizing one person to act on behalf of another.
Prepaid Expenses
Necessary to create an escrow account or to adjust the seller's existing escrow account. Can include taxes, hazard insurance, private mortgage insurance and special assessments.
Prepayment
A privilege in a mortgage permitting the borrower to make payments in advance of their due date.
Prepayment Penalty
Money charged for an early repayment of debt. Prepayment penalties are allowed in some form (but not necessarily imposed) in many states.
Primary Mortgage Market
Lenders making mortgage loans directly to borrower's such as savings and loan associations, commercial banks, and mortgage companies. These lenders sometimes sell their mortgages into the secondary mortgage markets such as to FNMA or GNMA.
Principle
The amount of debt, not counting interest, left on a loan.
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