Pre-Qualification
The process of determining how much money a prospective home buyer will be eligible to borrow before he or she applies for a loan.

Prime Rate
The interest rate that banks charge to their preferred customers. Changes in the prime rate influence changes in other rates, including mortgage interest rates.

Principal
The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage. More

Principal Balance
The outstanding balance of principal on a mortgage. The principal balance does not include interest or any other charges. See remaining balance.

Principal, Interest, Taxes, and Insurance (PITI)
The four components of a monthly mortgage payment. Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing money. Taxes and insurance refer to the amounts that are paid into an escrow account each month for property taxes and mortgage and hazard insurance.

Private Mortgage Insurance (MI)
Mortgage insurance that is provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults. Most lenders generally require MI for a loan with a loan-to-value (LTV) percentage in excess of 80 percent.

Promissory Note
A written promise to repay a specified amount over a specified period of time.

Public Auction
A meeting in an announced public location to sell property to repay a mortgage that is in default.

Purchase and Sale Agreement
A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

Purchase Money Transaction
The acquisition of property through the payment of money or its equivalent.