Financial Terms

A check that has been paid by the financial institution on which it was drawn. It is stamped “paid” on the day it is paid and it is charged to the account of the person who wrote the check.

Limits on changes in ARM interest rates or monthly payments, either in an adjustment period or over the life of the loan.

A safeguard built into ARMs to prevent drastic changes in interest rates.

Consumer safeguards, which limit the amount monthly payments on an adjustable rate mortgage may change. Since they do not limit the amount of interest the lender is earning, they may cause negative amortization.

The amount of cash earned after paying all expenses and taxes. Cash flow is calculated by adding net after-tax income, plus any bookkeeping expenses that result in items being deducted but not paid out in cash. Such bookkeeping entries include amounts charged off for depreciation, depletion, amortization and charges to reserves. Cash flow is a measure of a company’s worth and its ability to pay dividends on its stock.

A refinance for more than the balance of the original mortgage, so that money is taken out of the equity built up in the house.

A check written by a financial institution on its own funds and signed by a cashier – it is payable to a third party named by the customer who pays for the check at the time it is written. A cashier’s check that is drawn against the funds of the institution differs from a certified check, which is drawn against the funds in a specific depositor’s account.

This is the maximum allowable interest rate of an adjustable-rate mortgage.

The certificate issued to a depositor who opens a certificate account. The certificate is the written document issued by the financial institution as evidence of a deposit. It includes the issuer’s promise to return the deposit at a specified future date plus earnings at a specified rate of interest.

Document issued by the Veterans Administration to qualified veterans, which entitles them to VA guaranteed loans. It is obtainable through a local VA office by submitting form DD-214 (Separation Paper) and VA form 1880 (request for Certificate of Eligibility).

Document issued by a local government agency stating that a property meets the requirements of health and building codes.

A property appraisal performed by a VA-approved appraiser that establishes the limit on the principal of the VA loan.

Written opinion of the status of title to a property, given by an attorney or title company. This certificate does not offer the protection given by title insurance.

Document given to veterans or reservists who have served 90 days of continuous active duty (including training time) that enables them to obtain lower down payments on certain FHA-insured loans. It is obtainable through a local VA office by submitting form DD-214 (Separation Paper) with form 26-8261a (request for certificate of veteran status).

A check drawn on the issuer’s account for funds that have been segregated by the bank, guaranteeing payment.

This is the chronological order of conveyance of a property from the original owner to the present owner.

A written order instructing a financial institution to pay immediately on demand a specified amount of money from the check writer’s account to the person named on the check, or if a specific person is not named, to whoever bears the check to the institution for payment.

A demand deposit account, withdrawals from which may be made by a written, negotiable instrument.

A marketable title that is free of clouds and disputes.

Closing is the consummation of a financial transaction. In mortgage lending, closing is the process of delivering a deed, signing notes, mortgages and other loan documents, and advancing funds by the lender. All of these transactions normally occur at the same time.

Expenses paid by the buyer and/or seller for the cost of processing the sale of financing or real property. Such costs include loan fees, title fees and appraisal fees.

Financial disclosure statement that lists the funds received and expected at the closing.

An outstanding claim or encumbrance that if found valid, would affect or impair the owner’s title.