O – P

Operating Performance Ratio
A company’s operating performance ratio is figured by dividing operating expenses by net sales. It is intended to illustrate the efficiency of the company’s management.
Owner Financing
A home loan provided to a home buyer by the seller of the property.
Owner’s Equity
Owner’s equity is the business capital hypothetically available for distribution to shareholders.
A partnership is a legally binding business agreement wherein two or more individuals share in the operation and management of the business.
Personal Loan
A personal loan has higher interest rates than secured loans like a home-equity loan, but you are not required to put up any collateral to ensure repayment.
Piggyback Loan
Also called a “purchase money second mortgage,” a piggyback loan is used by homebuyers with less than 20 percent down to avoid paying for private mortgage insurance (PMI).
This stands for principal, interest, taxes and insurance. For most borrowers, PITI is the entire mortgage payment.
A point is equal to one percent of a mortgage loan amount. Loan fees may be quoted in points or in flat dollar amounts. “Discount points” are different. They are paid by borrowers who wish to get a lower than market mortgage rate.
Pre-Approved Loan
A pre-approved loan is issued by a lender before the borrower purchases a vehicle, and may give the borrower extra leverage with the dealer.
Pre-Approved Mortgage
A pre-approved mortgage tells you exactly how much money the lender will let you borrow.
Prepaid Items
Prepaid items are charges that the lender requires you to pay at settlement, such as accrued interest.
Prepaids are paid by a homebuyer at closing and put into an escrow account to cover the initial costs of expenses, such as private mortgage insurance, hazard insurance, taxes and special assessments.
Paying some or all of a loan ahead of schedule. Most mortgage loan programs allow prepayment. Prepaying a mortgage can reduce the amount of mortgage interest paid over the life of the loan and can eliminate the loan faster.
Prepayment Penalty
An extra payment due the lender if the mortgage is repaid ahead of schedule. Due to recent mortgage reforms, prepayment penalties have been largely disallowed.
Prepayment Premium
A prepayment premium is money a lender charges a borrower for repaying a debt early. Not all states allow the premiums.
A non-binding process in which prospective borrowers provide preliminary information concerning income, debts, assets and credit to mortgage lenders. The lenders perform some calculations and estimate the size of home purchase they will likely approve
Prime Rate
A commonly used short-term interest rate in the US banking system. It’s the benchmark rate lenders use to set rates for their most credit-worthy customers. The best customers may be granted loans at rates below Prime.
The balance on a loan. Monthly interest due is calculated by multiplying the principal balance by the monthly interest rate. When a monthly payment exceeds the interest due, the excess is applied to the principal balance, which reduces it.
Private Mortgage Insurance
Private mortgage insurance, or PMI, allows you to buy a home even if you don’t have a 20 percent down payment.
Processing Fee Clause
A section in the paperwork of a VA home loan that advises borrowers there may be a “reasonable” processing fee charged if a home buyer assumes the VA mortgage.
Profit And Loss Statement
A profit and loss statement, also known as a P&L or income statement, is a financial document that summarizes the revenues, costs, and expenses incurred by a business during a period of time.
A proprietorship, also often called a “sole proprietorship,” is a business structure wherein there is no legal distinction between the owner and the business.
Public Company
A public company is a business whose shares are traded on a stock exchange.
Purchase Option
An option to purchase a car or home that is being leased. The option might apply during the entire lease period or at the end of the lease period.

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