PITI: Monthly payment for Principal, Interest, Taxes, and Insurance.

PMI: Private Mortgage Insurance. Covers losses a lender may incur in the event a mortgage loan becomes default. Typically homes financed with less than 20% down payment may require PMI.

Payment shock: A very large increase in the payment on an adjustable rate mortgage that may surprise the borrower.

Pipeline risk: The lender's risk that between the time a commitment is given to the borrower and the time the loan is closed, interest rates will rise and the lender will take a loss on selling the loan.

Planned Unit Development (PUD): A project or subdivision that consists of common property that is owned and maintained by an owner's association for the benefit and use of the individual unit owners.

Points: A one-time charge by the lender to increase the yield of the loan; a point is 1 percent of the amount of the mortgage.

Prepaids: Fees collected at closing to cover items such as setting up escrow accounts for property taxes, homeowner's insurance and mortgage insurance premiums.

Prepayment penalty: A charge imposed by the lender if the borrower pays off the loan early. The charge is usually expressed as a percent of the loan balance at the time of prepayment.

Principal: The portion of the monthly mortgage payment that is used to reduce the loan balance.

Processing: What the lender does with your loan application. Processing involves compiling and maintaining the file of information about the transaction, including the credit report, appraisal, verification of employment and assets. The processed loan file is given to underwriting for the loan decision.