K. Hovnanian® American Mortgage, L.L.C.™

Glossary of Terms

It is often said that mortgage financing has a language of its own. To help you through the process, we have a dictionary of common terms you’re likely to come across during the home financing process. Of course, if you’re unsure about a term, or you see something you’re unfamiliar with, give us a call at 888-509-2867.

O

OBSOLESCENCE

Impairment of desirability and usefulness brought about by changes in the art, design, or process or from external influencing circumstances that make a property less desirable and valuable for a continuity or use.

OFFER

A promise by one party to do a specified deed as the other party in turn performs a specific deed.

OFFICE OF COMPTROLLER CURRENCY

A federal government regulatory agency that oversees some commercial banks.

OFFICE OF THRIFT SUPERVISION

A federal government regulatory agency that oversees savings and loans.

OPEN-END MORTGAGE

A mortgage permitting the mortgagor to borrow additional money under the same mortgage, with certain conditions.

OPEN LISTING

An authorization given by a property owner to a real estate broker wherein said broker is given the nonexclusive right to secure a purchaser; open listings may be given to any number of brokers without liability to compensate any except the one who first secures a buyer ready, willing, and able to meet the terms of the listing, or secures the acceptance by the seller of a satisfactory offer.

ORIGINATION FEE

A fee or charge for work involved in the evaluation, preparation, and submission of a proposed mortgage loan.

OWNER OF RECORD

The individual(s) named on a deed that has been recorded at the local municipality.

OWNERS’ POLICY

Title insurance for the owner of property rather than a lien holder.

OWNERSHIP

The right to possess and use property to the exclusion of others.

P

P & I

Principal and interest. Does not consider taxes and insurance that are a required part of the monthly loan payment.

PACKAGE MORTGAGE

Mortgage covering both real and personal property.

PAPER

A mortgage, deed of trust, or land contract that is given instead of cash.

PARTIAL RELEASE

A release of a portion of property covered by a mortgage.

PERMANENT MORTGAGE

A mortgage on completed construction on the same property under one mortgage or trust deed.

PERSONAL

Property that is movable. All property is either personality, realty, or mixed.

PHYSICAL DEPRECIATION

A term that is frequently used when physical deterioration is intended. In a broad concept it may relate to those elements contributing to depreciation that are existent or inherent in the physical property itself, as distinguished from other and external circumstances that may influence its utilization.

PITI

Abbreviation for principal, interest, taxes, and insurance, which are often combined in a single, monthly, mortgage payment.

PLANNED UNIT DEVELOPMENT (PUD)

A housing development where there is a homeowners association and common areas owned by the homeowners.

PLAT

A map or chart of a lot, subdivision, or community showing boundary lines, buildings, and easements.

PMI

Abbreviation for private mortgage insurance; insurance issued by a company that insures the lender against loss in the event that the borrower defaults on the mortgage.

POINTS

Origination fees charged by the originating lender or broker and/or discount fees charged by lenders to increase the overall yield. A point is equal to one percent of the principal amount of the mortgage.

PORTFOLIO LOAN

Loans held as an investment by a bank, savings and loan, or credit union.

POWER OF ATTORNEY

A written instrument authorizing a person to act as the agent of the person granting it, and a general power authorizing the agent to act generally on behalf of the principal. A special power limits the agent to a particular or specific act as a landowner may grant an agent special power of attorney to convey a single and specific parcel of property. Under the provisions of a general power of attorney, the agent having the power may convey any or all property of the principal granting the general power of attorney.

PREPAID INTEREST

Prepaid interest is the interest charged to borrowers at loan closing to pay for the cost of borrowing for a partial month. For example, if a loan closes on the 15th of the month and the first payment is due 45 days later, the lender will charge 15 days of prepaid interest.

PREPAID ITEMS OF EXPENSE

Prorations of prepaid items of expense that are credited to the seller in the closing statement.

PREPAYMENT

Full payment of the principal before the due date; occurs when a property is sold or the borrower refinances the existing loan.

PRE-PAYMENT PENALTY

An additional charge imposed by the lender for paying off a loan before the due date.

PRE-QUALIFICATION

A lender's written opinion of a borrower's ability to qualify a specified loan amount.

PRIMARY MORTGAGE MARKET

Lenders making mortgage loans directly to borrowers such as savings and loan associations, commercial banks, and mortgage companies. These lenders sometimes sell their mortgages into the secondary mortgage markets.

PRIMARY RESIDENCE

Considered the permanent location of residency.

PRINCIPAL

1) The outstanding balance of a loan. 2) A party to a real estate transaction. 3) The head of a real estate firm.

PRIVATE MORTGAGE INSURANCE (PMI)

In the event that you do not have a 20 percent down payment, lenders will allow a smaller down payment — as low as 5 percent in some cases. With the smaller down payment loans, however, borrowers are usually required to carry private mortgage insurance.

PROCESSING, UNDERWRITING, AND DOCUMENT FEES

Charges for the lender's services associated with making the loan.

PROPERTY

The rights of ownership. The right to use, possess, enjoy, and dispose of a thing in every legal way and to exclude everyone else from interfering with these rights. Property is generally classified into two groups, personal property and real property.

PROPERTY TAX

A tax levied by the local municipality or county on real and personal property.

PRORATE

To divide in proportionate shares, such as taxes, insurance, rent, or other items.

PRORATIONS

The allocation of expenses, such as taxes between buyer and seller at closing based on the number of days the property is owned during the month of closing.

PUD (PLANNED UNIT DEVELOPMENT)