51. Mortgage Life Insurance

A type of term life insurance often bought by home buyers. The coverage decreases as the mortgage balance declines. If the borrower dies while the policy is in force, the mortgage debt is automatically covered by insurance proceeds.

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52. Negative Amortization

Occurs when monthly payments fail to cover the interest cost. The interest that isn't covered is added to the unpaid principal balance, which means that even after several payments the borrowers could owe more than they did at the beginning of the...

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53. Origination Fee

A fee or charge for work involved in evaluating, preparing, and submitting a proposed mortgage loan. The fee is limited to 1 percent for FHA and VA loans.

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54. Payment Cap

The maximum amount the payment can adjust in any given time frame.

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55. Planned Unit Development (PUD)

A zoning designation for property developed at the same or slightly greater overall density than conventional development, sometimes with improvements clustered between open, common areas. Use may be residential, commercial or industrial.

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56. Point

An amount equal to one percent of the principal amount of the investment or note. Lender assesses loan discount points at closing to increase the yield on the mortgage to a position competitive with other types of investments.

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57. Prepayment Penalty

A fee charged to a borrower who pays a loan before it is due. Not allowed for FHA or VA loans.

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58. Private Mortgage Insurance (PMI)

Insurance written by a private company protecting the lender against loss if the borrower defaults on the mortgage.

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59. Purchase Agreement

A written document in which the purchaser agrees to buy certain real estate and the seller agrees to sell under stated terms and conditions. Also called a sales contract, earnest money contract, or agreement for sale.

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60. Rate Gap

The difference between where the rate is now and where it could adjust to on an ARM. Also used to compare the difference between a current conventional rate and that of an ARM.

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