Financial Terms

A plastic card that can be used by a customer to withdraw funds on deposit in the customer’s account using an automated teller machine. MidFirst Debit Cards may also be used at any merchant that accepts Visa. A debit card transaction pays the seller of goods or services by withdrawing funds already on deposit in the buyer’s account, as opposed to a credit card transaction in which funds are loaned to the buyer by the card issuer.

Money, services, goods or anything else of value that is owed by one person to another as the result of a previous agreement.

The percentage of before-tax earnings that are spent to pay obligations such as auto loans, student loans and credit card balances. Lenders look at two ratios. The front-end ratio is the percentage of monthly before-tax earnings that are spent on house payments (including principal, interest, taxes and insurance). In the back-end ratio, the borrower’s other debts are factored in.

This is a written agreement in proper legal form that conveys title to, or an interest in, real property.

A deed of trust is an agreement to pledge property as security for a loan, used in many states in place of a mortgage. In such an arrangement, the borrower transfers legal title to a trustee who holds the property in trust as security for the repayment of the debt. The deed of trust becomes void if the debt is repaid, but if the borrower defaults on the loan, the trustee may sell the property to pay the debt.

This is a failure to meet legal obligations in a contract, including failure to make payments on a loan. A mortgage is generally considered to be in default when a payment is 30 days past due.

Interest added to the balance of a loan when monthly payments are not sufficient to cover it (see negative amortization).

This is a failure to make payments on time.

A loan that is 30 to 60 days past due with no payments being made.

This is an account from which a depositor may withdraw funds immediately without prior notice, commonly known as a checking account. Since funds may be withdrawn on demand in person or by presentation of a check, the account has many of the liquid characteristics of circulating currency.

1. The placement of funds into an account at an institution in order to increase the credit balance of the account. 2. That which is deposited. 3. A sum of money given to assure the future purchase of something. 4. A portion of the purchase price given as earnest money, or a down payment, by the buyer to the seller.

Depreciation is the decline in the dollar value of an asset over time and through use. The amount of annual depreciation may be computed differently for tax purposes than the actual decline in value.

A plan in which an individual authorizes the issuer of payroll, Social Security, dividend or other checks to send the checks directly to a thrift institution or bank for deposit in the individual’s account.

A sum a borrower pays to a lender to decrease the interest rate of a mortgage. A point equals 1% of the loan amount.

The fee charged by the lender for review of documents necessary to fund a loan.

A state tax in the form of stamps, that is required on deeds and mortgages when a real estate title passes from one owner to another.

A written order signed by one party (the drawer) requesting a second party (the drawee) to pay a specified amount of money to a third party (the payee) at some future time. A check is a draft.

The date on which all or part of a debt is required to be paid; the maturity date.

This is a provision in a mortgage or deed of trust allowing the lender to demand immediate payment of the loan balance upon sale of the property.

Money given by a buyer when making a formal offer to a seller of a property to demonstrate that the buyer is serious – also called a deposit.

The cost of a mortgage expressed as a yearly rate, usually higher than the interest rate on the mortgage since this figure includes up-front costs of acquiring the loan.

Encumbrance is a legal right or interest in a property that affects title and lessens the property value. Encumbrances can take the form of claims, liens, unpaid taxes, etc. These will usually have to be taken care of before a buyer will want to purchase the property.

A signature either stamped or written by hand on the back of a negotiable instrument by which the signer transfers ownership of the instrument to another party.

Federal law requiring creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs.

In real estate, equity is the difference between the fair market value of a property and the amount of any mortgage debt, or liens against the property, still outstanding. In business, it is the excess of a firm’s assets over its liabilities. The term is also used to refer to the ownership interest of stockholders in a company, and to the value of the investments raised by the stock offerings.

An account in which a neutral third party holds the documents and money in a real-estate transfer until all conditions of a sale are met. Also, an account in which money for property taxes and insurance is held until paid; money is added to the account every time a mortgage payment is made.

Account held by the lender containing funds collected as part of mortgage payments for annual expenses, such as taxes and insurance, so that the homeowner does not have to collect a large sum when these fall due.

When a buyer borrows less than 80% of the cost of the house, he may pay a one-time fee and elect not to open an escrow account, but to pay the hazard insurance and property taxes himself.

A document provided by the closing agent a few days before closing, detailing all costs and indicating the final sum the buyer will be required to bring to the closing.

This is also known as back-end ratio and debt-to-income ratio. The figure is derived by dividing a borrower’s monthly financial obligations by his/her gross monthly income.