Mortgage Terms

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The mortgage industry has many unique and confusing terms and acronyms. We hope these descriptions help you to better understand the lending process.

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There are 7 names in this directory beginning with the letter P.
Permanent Buydown
Veterans can pay reasonable discount points to buy down their interest rate. A discount point is 1 percent of the loan amount. Borrowers have to pay this cost up front.

PITI
The acronym stands for Principal, Interest, Taxes and Insurance. These are the four pillars of a veteran's monthly mortgage payment.

Power of Attorney
A surrogate with power of attorney can sign contracts and other documents on behalf of an absent service member. Many lenders require a unique power of attorney document.

Preapproval
This is a more serious step than prequalification. Real estate agents and sellers put significant stock into loan preapproval. But this is not a guarantee from a lender or any kind of binding document for the borrower.

Prequalification
This introductory step involves an unverified, cursory discussion about a borrower's finances. Prequalification helps veterans get a sense of what they can afford but it means little to sellers and real estate agents, who are looking for preapproval letters.

Prime
This essentially means borrowers or loans at or above an accepted credit standard, typically around 620. Some loans and borrowers beneath that are considered greater risks and classified as subprime.

Private Mortgage Insurance (PMI)
On most mortgages, borrowers who can't put down 20 percent of the loan amount are required to pay insurance. It protects lenders against borrowers who default and also helps borrowers who can't muster a large down payment. There is no PMI on a VA loan.

Mortgage Calculator

Purchase price
Please enter here the amount you expect to pay for a home.
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Down payment
Down payment is cash that you pay upfront for your home.
20.0%
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Term in years
Number of years you have to pay.
years
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Interest rate (per year)
The percentage of interest that you will pay on your mortgage for a specific term.
%
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Property tax
Enter your property tax here if you know it.
per year
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Home insurance
Most lenders require home insurance. Enter its price here.
per year
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PMI
PMI is Private Mortgage Insurance which is usually required to pay if your Down payment less than 20%.
per month
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Your total monthly payment


$

Principal & Interest
$
Home insurance
$
Property taxes
$
PMI
$