P&I
Principal and interest.

Payment Adjustment Period
The length of time (typically a year) between changes to the AML borrower's P&I payments. On a longer payment change AML, for instance a three-year or five-year AML, the initial Payment Adjustment Period may still be one year if there is a payment discount or buydown, causing the payments to change after the first year.

Payment Buydown
Payment buydowns occur when a third party, typically a builder, pays part of the initial P&I payment for a year or two, so that the borrower has smaller payments and can qualify for the loan. Payment buydowns can result in rapid payment increases in the initial years of the loan.

Payment Cap
A limit on the amount a payment can be changed at the end of each Payment Adjustment Period. It can be a percentage of the previous payment, a fixed dollar amount, or a specified change in the interest rate on which the payment is calculated. It does not have to be the same as the interest rate cap.

Payment Discount
In a payment discount, the lender reduces the first year's interest rate to make the mortgage more attractive to borrowers. It can be offered on either AML's or FRM's and usually results in a payment jump after the first year.

Period Cap
See Rate Caps.

Points
A one-time charge by the lender to increase the yield of the loan; a point is one percent of the amount of the mortgage.

Pre-Qualification
The process of determining how much money a prospective home buyer will be eligible to borrow before the application for a loan.

Principal
The amount borrowed or remaining unpaid; also that part of the monthly payment that reduces the outstanding balance of the mortgage.

Principal, Interest, Taxes, and Insurance (PITI)
Principal, Interest, Taxes, and Insurance are components of a mortgage payment.

Private Mortgage Insurance (PMI)
Insurance provided by non-government insurers that protect lenders against loss if a borrower defaults.

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