Financial Terms

Collateral is something of value that is pledged as security for a loan. The lender can repossess the collateral if the loan is not repaid.

 1. The presentation for payment and the subsequent actual payment of a draft, check or other obligation.

2. The process of resolving a delinquent loan.

The ratio of the total mortgage liens against the subject property to the lesser of either the appraised value or the sales price.

Money paid to a real estate agent or broker by the seller (usually 6-7% of the sale price of the house).

A formal offer made from a lender to provide a loan under certain terms or conditions to a borrower.

The interest that accrues when earnings for each specified period are added to the principal, thus increasing the principal base on which subsequent interest is computed.

A mortgage loan under the maximum amount of loans FNMA and FHLMC are legally allowed to buy (up to $275,000 for a one-unit property).

This is a calculation that expresses the cost of a mortgage loan as a yearly rate (according to a federally mandated procedure) over the life of the loan, including the construction phase. The APR calculation takes into account monthly interest payments, mortgage insurance, points, and certain fees paid at origination. It generally results in a rate higher than the stated interest rate on the note, as well as the estimated APR disclosed on the permanent financing phase of the loan term. You may receive two APRs – one for the construction period of your loan and the other for the permanent financing of your loan – or the APR can be combined for both the construction and permanent periods of your loans.

This is a short-term interim loan to fund the construction of buildings or homes, which usually advances the money to the builder as work progresses. After completion, a permanent loan is used to pay off the construction loan.

Consumer credit is any loan or extension of credit to an individual for personal, family or household use not involving real estate.

A condition that must be satisfied before a contract is legally binding – before a sale can close.

This is the agreement between the buyer and seller on the purchase price, terms, and conditions of a sale.

A mortgage not insured by the FHA or guaranteed by the VA.

Usually refers to a fixed-rate, 30-year mortgage that is not insured by the FHA, Farmers Home Administration (FmHA) or Veterans Administration.

A provision in some ARMs allows you to change an ARM to a fixed-rate loan, usually after the first adjustment period. The new fixed rate will be set at current rates, and there may be a charge for the conversion feature.

An adjustable-rate mortgage (ARM) that can be converted to a fixed-rate mortgage under specified conditions.

An adjustable-rate home loan that gives the borrower the option at specified times of changing into a fixed-rate loan.

The transfer of a deed, or possibly a lease or mortgage.

An index of the weighted-average interest rate paid by savings institutions for sources of funds, usually by members of the 11th Federal Home Loan Bank District.

An additional signature attesting to the authenticity of the first signature or the authenticity of the document being signed.

A set of notices, usually computer generated, that a borrower remits to the lender, one at a time, with each loan repayment.

This is a document that defines the use, requirements and restrictions of a property.

1. The provision of goods or services in exchange for the promise of future payment. 2. An accounting term that refers to the right-hand side of an account record in which the amounts are entered in a double entry system of bookkeeping.

A credit report details the credit history of a prospective borrower, used to help determine creditworthiness.

An individual, business or other organization that money or something of value is owed.

This is the ledger balance plus or minus today’s online activity. Online activity includes in-bank teller and dollar activity, memo posting, ATM/debit card activity and ACH transactions.