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Financial Education

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Financial Education

Your Own Home

A \| B \| C \| D \| E \| F \| G \| H \| I \| J \| K \| L \| M \| N \| O \| P \| Q \| R \| S \| T \| U \| V \| W \| X \| Y \| Z
Terms	Definitions
A
Annual Percentage Rate	The APR is a measure of the cost of your loan expressed as a yearly percentage rate, such as 10% or 11%.

Applicant	A person applying for credit privileges, employment or some other benefit.

Asset	An asset is anything owned by a person or organization having monetary value.
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B
Balloon Mortgage	A balloon mortgage is one with a large payment at the end of your loan term. This is often after a series of low monthly payments. A balloon mortgage generally offers very low rates for an initial period of time (usually 5, 7 or 10 years). After the period ends, the entire balance is due. Many borrowers pay the balance by refinancing their mortgage.


Broker	A mortgage broker helps a prospective borrower shop around for the best rate and terms in obtaining a mortgage loan.

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C
Caps	Caps are provisions of an adjustable rate mortgage, which limit how much the interest rate can change at each adjustment period or over the life of the loan. A payment cap limits how much the payment due on the loan can increase and decrease.

Closing Costs	Closing costs are various charges associated with the transfer of property. The lender must disclose these costs to you. Different costs can be found on the Mortgage Shopping Worksheet.

Compensating Factors	Compensating factors are favorable factors that might outweigh the negative factors. For example, a borrower has high ratios, but he or she balances this with good credit history and extra cash in a savings account.

Condominium	A condominium is an apartment building or multiple-unit housing area in which the living units are owned individually.
Conventional Loan	A conventional loan is a mortgage that is not guaranteed, insured, or made by the federal government.
Credit	A trust or a promise to pay later for goods or services purchased today.
Credit History	Record of how a consumer has paid credit accounts in the past, used as a guide to determine whether the consumer is likely to pay accounts on time in the future.



Credit Report	A record or file to a prospective lender or employer on the credit standing of a prospective borrower, used to help determine credit worthiness.
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D
Debt-to-Income Ratio (DTI)	DTI is the ratio of monthly debt payments to monthly gross income. Lenders use DTI ratio to determine whether a borrower's income qualifies him or her for a mortgage.
Down payment	The down payment is the portion of the home's purchase price the buyer pays in cash.
Duplex House	A duplex is a house divided into two living units.
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E
Equifax	One of the three major credit reporting agencies, headquartered in Atlanta, Georgia.

Experian	One of the three major credit reporting agencies, formerly known as TRW.
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F
Finance Charge	The finance charge is the cost of credit.
Fixed Rate Loan	A fixed rate loan has an interest rate and payment amount that stays the same throughout the term of the loan.
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G
Good Faith Estimate of Settlement Costs (GFE)	When you apply for a loan, the Real Estate Settlement Procedures Act (RESPA) requires that the lender or mortgage broker give you a GFE of the settlement service charges you will likely have to pay.
Government Mortgages	A government mortgage is insured by HUD (through the Federal Housing Administration (FHA)) or guaranteed by the Department of Veteran's Affairs or the Rural Housing Service.
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H
HUD-1 Settlement Statement	A HUD settlement statement is a summary of all the costs paid by the buyer and seller in a mortgage transaction.
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I
Index	The index is a base interest rate used to calculate the interest rate that will be charged on a variable rate loan. The rate you will pay on a variable rate loan is usually a set percentage rate above the base rate, or index.
Individual Development Account (IDA)	An IDA is a matched savings account. When an account is matched it means that another organization, such as a foundation, corporation, or government entity agrees to add money to your account.
Interest	Interest is the charge for borrowing money.
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J
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L
Lien	A legal hold or claim of one person on the property of another as security for a debt or charge. The right given by law to satisfy debt. (A lien must be paid and released).
Loan Origination Fees / Underwriting Fees	These are fees charged by the lender for processing or evaluating the loan application and are often expressed as a percentage of the loan amount.
Loan to Value (LTV)	LTV is the amount of money you borrow compared to the value of the property you are buying.
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M
Mortgage	A lien or claim against real property given by the buyer to the lender as security for money borrowed. 1st Mortgage-Also known as the "primary" mortgage-has priority over the claims of subsequent lenders for the same property. 2nd Mortgage-Also known as the "secondary" mortgage-is a loan secured by mortgage or trust deed, which lien is "junior" to another mortgage or trust.
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P
Principle, Interest, Taxes and Insurance (PITI)	PITI are the factors included in the standard mortgage payment.
Point	A point is the amount equal to one percent of the loan amount. It is a fee paid to the broker or lender for the loan, often linked to the interest rate.
Principal	The principal is the loan amount borrowed or still remaining on the loan.
Private Mortgage Insurance (PMI)	PMI is mortgage insurance issued by private insurers that protects the lender against loss in the event the borrower defaults on a mortgage with a low down payment.
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R
Rate Lock	A rate lock is the time period, usually 30 to 60 days, that a mortgage lender agrees to hold the mortgage rate and points payable by the borrower to the rate quoted by the lender on a given day.
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S
Settlement Costs/ Closing Costs	Fees associated with the transfer of property to a purchaser and recording the mortgage lien on the property deed by the bank financing the transaction. This may include application fees, title examination, abstract of title, title insurance, and property survey fees; fees for preparing deeds, mortgages, and settlement documents; attorney's fees; recording fees; and notary, appraisal, and credit report fees.
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T
Title	The title indicates the right of ownership in the property.
Title Insurance	Title insurance protects the buyer and lender against losses arising from disputes over the ownership of property.
Townhouse	A townhouse is one of a row of houses connected by common side walls.
Trans Union	One of the three major Credit Reporting Agencies.
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V
Variable Rate Loan	A variable rate loan has an interest rate that might change during any period of the loan as written in the contract (loan agreement). Variable rate mortgages are often referred to as adjustable rate mortgages (ARMs).
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