Glossary of Mortgage Terms

A prefab home is a house that’s built in sections at a factory, shipped to a building site, and assembled on a permanent foundation where the owner plans to live.

Preforeclosure is the period between when a homeowner falls seriously behind on mortgage payments and when the lender formally begins the legal foreclosure process to take back the property.

A prepayment penalty is a fee that some lenders charge when you pay off all or a large part of your mortgage ahead of schedule, usually within the first few years of the loan.

Your primary residence is the home where you spend most of the year. It also affects the mortgage rates you can get, the tax breaks you can claim, and the loan programs you can use.

Principal is the amount of money you borrow to buy a home, and interest is the fee your lender charges you for borrowing that money, with both making up the biggest share of your monthly mortgage payment.

Private mortgage insurance, or PMI, is a monthly fee your lender adds to your mortgage payment when you put less than 20% down on a conventional loan, and it protects the lender if you stop making payments.

A probate sale is a way for a court to sell real estate that belonged to someone who has died. The property must go through the legal system before it can be given to heirs or sold to buyers.

A promissory note is a legal document you sign at closing that spells out your promise to repay your mortgage loan under specific terms, including the interest rate, payment schedule, and total amount borrowed.

Property classification is how lenders, the IRS, and local governments put your home into one of three groups: primary residence, second home, or investment property.

A property line map is a drawing that shows the legal boundaries of a piece of land, including the size of the lot, any easements, and the locations of nearby roads and utilities.