Financial Terms Glossary
A retirement savings plan sponsored by an employer that allows employees to invest a portion of their paycheck before taxes are taken out.
A tax-advantaged savings plan designed to encourage saving for future education costs.
A fee related to the title insurance required by the lender. A public record search exam is done to insure that both you and the lender are aware of any liens or encumbrances that could affect the property. For our comparison purposes, an abstract exam fee is considered to be a third party fee and may be included in the title insurance fee by some lenders.
A provision in a mortgage that gives the lender the right to demand payment of the entire principal balance if a monthly payment is missed.
A party’s consent to enter into a contract and be bound by the terms of the offer.
A payment by a borrower of more than the scheduled principal amount due, in order to reduce the remaining balance of the loan.
A mortgage with an interest rate that adjusts periodically based on the performance of a specific index.
The process of spreading out a loan into a series of fixed payments over time.
A yearly charge by banks and financial institutions to maintain your account and credit line.
The annual rate charged for borrowing or earned through an investment, which represents the actual yearly cost of funds over the term of a loan.
The effective annual rate of return taking into account the effect of compounding interest.
A financial product that pays out a fixed stream of payments to an individual, primarily used as an income stream for retirees.
In order to verify that the value of your home supports the loan amount you request, an appraisal will be ordered by the lender. The appraisal is generally performed by a professional who is familiar with home values in the area and may or may not require an interior inspection of the home. The fee for the appraisal is commonly passed on to the borrower by the lender. For our comparison purposes, the appraisal fee is a third party fee.
An opinion of a property’s fair market value, based on an appraiser’s knowledge, experience and analysis of the property.
A person qualified by education, training, and experience to estimate the value of real property and personal property.
Any resource owned by an individual or corporation that is expected to produce positive economic value.
An investment strategy that aims to balance risk and reward by apportioning a portfolio's assets according to an individual's goals, risk tolerance, and investment horizon.
A loan used to purchase a vehicle, typically secured by the vehicle itself.
An electronic banking outlet that allows customers to complete basic transactions without the aid of a branch representative or teller.
The amount of money in a financial repository, such as a checking account, at any given moment.
A request to check the current funds available in an account.
The act of transferring debt from one credit card to another, usually to take advantage of a lower interest rate.
A short-term fixed-rate loan which involves smaller payments for a certain period of time and one large payment for the entire balance due at the end of the loan term.
The final payment that is made at the maturity date of a balloon mortgage and pays the loan in full.
A legal proceeding involving a person or business that is unable to repay outstanding debts.
The release of a debtor from personal liability for certain types of debts after a bankruptcy proceeding, effectively giving them a "fresh start".
A person who derives advantage from something, especially a trust, will, or life insurance policy.
A service offered by banks and other financial institutions allowing customers to pay bills electronically from their accounts.
An agreement between a buyer and seller to purchase real estate. A binder, also known as an offer to purchase or a sales contract, secures the right to purchase real estate upon agreed terms for a limited period of time. If the buyer changes his mind or is unable to purchase, the earnest money that was paid is forfeited unless the binder expressly provides that it is to be refunded.
A sum of cash paid to a seller by a buyer prior to the closing to show that the buyer is serious about buying the house. The binder deposit is deducted from the purchase price at closing and is not an additional cost. Sometimes referred to as earnest money.
A fixed income investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period at a fixed interest rate.
When it comes to mortgages (specifically mortgage refinancing), the break-even point is the time at which your savings start to exceed the initial costs of a refinance.
Designed for short-term use, a bridge loan is a financing option designed to help borrowers during a transitional period. This can be beneficial when you are buying and selling at the same time. They are typically more expensive than other sources of financing, so should only be used when absolutely needed.
A mortgage broker is a third-party or intermediary who assists homebuyers in finding the best mortgage type and lender for their unique needs or financial goals.
A certificate of deposit that is purchased through a financial intermediary instead of directly from a bank.
Sometimes known as buying mortgage points, a mortgage buydown is a strategy to temporarily lower the interest rate, and therefore your mortgage payment, on your home loan. A one-time up-front fee is required, but it could end up saving you money over time. To determine if this option is right for you, you will want to calculate your break-even point based on factors like current interest rates and how long you intend to wait before moving again.
A contract provision that gives the right to terminate obligations upon the occurrence of specified events.
Refers to a provision of an adjustable rate mortgage (ARM) that limits how much the interest rate or payment can increase or decrease.
Refers to a provision of an adjustable rate mortgage (ARM) that limits how much the interest rate or payment can increase or decrease.
The cost of an improvement made to extend the useful life of a property or to add to its value.
Any component constructed as a permanent improvement to real property that increases its value and adds to its useful life.
A service provided by most credit card and charge card issuers, allowing cardholders to withdraw cash up to a certain limit.
When you hear the term “cash to close,” it is referencing the total amount of money that you need to provide in order to close on a home purchase agreement. This total includes your down payment, closing costs and fees, plus any prepaid expenses.
A check guaranteed by a bank, drawn on the bank's own funds and signed by a cashier.
A savings certificate with a fixed maturity date and specified fixed interest rate that can be issued in any denomination aside from minimum investment requirements.
A document issued by the Department of Veterans Affairs (VA) that establishes the maximum value and loan amount for a VA loan.
A declaration by a creditor that an amount of debt is unlikely to be collected, indicating that it is considered a bad debt.
A deposit account held at a financial institution that allows withdrawals and deposits, accessible via checks, automated teller machines, and electronic debits.
A meeting of the parties involved in a real estate transaction to finalize the process. In the case of a purchase, the close of escrow usually involves the seller, the buyer, the real estate broker and the lender. In the case of a refinance, the close of escrow involves the borrower and the lender. Sometimes referred to as the settlement or closing.
An account that has been closed either by the customer or the bank, no longer allowing transactions.
A single fee that a home buyer must pay at closing. Closing costs are made up of individual closing cost items such as origination fees, escrow fees, underwriting fees and processing fees. Most closing cost items are included as numbered items on the HUD-1 Settlement Statement.
Also referred to as the HUD-1 or the settlement statement, this is the document that provides line by line detail of the financial details related to a specific real estate transaction such as the fees paid by the seller and the buyer for a purchase transaction or the fees paid by the borrower for refinances.
A person who signs an official document (such as a loan agreement) alongside the primary signee, promising to take on the financial obligations if the primary borrower defaults.
Something pledged as security for repayment of a loan, to be forfeited in the event of a default.
A loan that is secured by collateral, typically assets that the lender can seize if the loan goes unpaid.
Interest calculated on the initial principal, which also includes all of the accumulated interest from previous periods on a deposit or loan.
The frequency at which interest is added to the principal balance of a financial instrument.
A type of credit granted to consumers to fund specific types of expenditures, which may not be related to a home mortgage or business.
A conventional loan is your standard-issue, classic home loan option. This type of loan is secured and offered by a private financial institution—not a government agency. Typically when you hear people mention a mortgage, they mean a conventional mortgage.
A provision in some adjustable-rate-mortgages (ARM’s) that allows the borrower to change the ARM to a fixed-rate-mortgage at a specified period within the term of the loan.
A loan designed to help individuals build credit, typically secured by the loan amount held in a bank account while payments are made.
A card issued by a financial company giving the holder an option to borrow funds, usually at point of sale, with interest charged if not repaid in a full monthly payment.
A service that provides guidance on consumer credit, budgeting, and debt management, often from a nonprofit organization.
A security measure to restrict access to an individual’s credit report, which can prevent thieves from opening new accounts in their name.
A record of a consumer’s ability to repay debts and demonstrated responsibility in managing credit.
The maximum amount of credit that a financial institution or other lender will extend to a debtor for a particular line of credit.
An arrangement between a financial institution and a customer that establishes a maximum loan balance that the lender permits the borrower to access or maintain.
A detailed breakdown of an individual's credit history prepared by a credit bureau.
A numerical expression based on a level analysis of a person's credit files, to represent the creditworthiness of an individual.
A member-owned financial cooperative, controlled by its members and operated for the purpose of promoting thrift, providing credit at competitive rates, and providing other financial services to its members.
The status of being a member of a credit union, which is typically required to access the financial services offered.
A payment card that deducts money directly from a consumer’s checking account to pay for a purchase.
The act of combining several loans or liabilities into one loan.
A structured payment plan set up by a credit counselor or debt management company for a debtor to pay off debts.
A financial ratio that compares a company’s total debt to its total assets, giving investors and creditors an idea of the financial structure of the company.
DTI refers to the percentage of your monthly income spent on paying off debt. Your lender will calculate your DTI ratio using the minimum monthly payments on all applicable debt and dividing that total by your gross monthly income. While DTI requirements vary depending on the type of mortgage and your lender, a ratio of 43% or less is typically accepted by most lenders.
A personal finance measure that compares an individual’s total debt to their overall income.
A process that allows a borrower to transfer the ownership of a property to the lender in order to avoid loss of the property through foreclosure.
This document, referred to as a mortgage in some states, pledges a property to a lender or trustee as security for the repayment of a debt.
A tax that is required in some municipalities if a property changes hands. The amount of this tax can vary with each state, city and county. For our comparison purposes, this fee is considered a tax or other unavoidable fee.
Failure to meet the legal obligations (or conditions) of a loan.
A term used to describe a borrower's failure to make loan payments on time.
The United States Department of Housing and Urban Development (usually abbreviated to HUD) is the government branch tasked with undertaking all challenges related to homeownership. The FHA falls under the umbrella of the HUD.
A VA Loan is a type of government-backed mortgage specifically for military members and their families. The U.S. Department of Veterans Affairs (the VA) issues these loans to qualifying servicemembers as a special thank you for everything they do. They feature low rates and no down payments. But there are specific requirements for VA loans, like VA funding fees, and not all lenders are fully equipped to deal with these logistics.
An electronic payment from one bank account to another, commonly used for payroll or benefit payments.
A loan made directly by a lender to a borrower, without the use of third parties.
A disagreement or argument about something important, often seen in the context of credit reporting inaccuracies.
A payment made by a corporation to its shareholders, usually as a distribution of profits.
The amount of dividend payment expressed as a dollar amount per share of stock owned.
A written order signed by one party (the drawer) instructing another party (the drawee) to pay a specified sum to a third party (the payee).
An electronic signature, which provides a legal way to obtain consent or approval on electronic documents or forms.
Taking funds out of a financial account or investment plan before the agreed-upon withdrawal date, often incurring penalties.
A penalty incurred for withdrawing funds from an investment earlier than is stipulated in the contract.
A right of way giving persons, other than the owner, access to or over a property.
The continued use of another person’s property for a special purpose that can develop into permanent use if certain conditions are met.
A system of transferring money from one bank account directly to another without any paper money changing hands.
A bank account with funds set aside to cover large, unexpected expenses, such as an unforeseen medical bill or home repair.
One of the three major credit reporting agencies in the United States, which collects and aggregates information on over 800 million individual consumers and more than 88 million businesses worldwide.
The value of an ownership interest in property, including shareholders' equity in a corporation.
A loan in which the borrower uses the equity of their home as collateral.
A financial arrangement where a third party holds and regulates payment of the funds required for two parties involved in a given transaction.
The account that funds are held in by the lender for the payment of real estate taxes and/or homeowner's insurance. Can also refer to the account that funds are held in for the completion of repairs or improvements to a property that cannot be completed prior to closing.
A periodic review of escrow accounts to determine if current monthly deposits balances will provide sufficient funds to pay property taxes, hazard insurance and other bills when they come due.
The portion of a borrower’s monthly mortgage payment that is held by the loan servicing company to pay for property taxes, hazard insurance, mortgage insurance and other items as they become due.
One of the three major credit reporting agencies, which collects and reports information about the credit history of individuals and businesses.
A federal consumer protection regulation that controls the disclosure of credit information and establishes procedures for correcting mistakes in your credit file.
A United States government corporation providing deposit insurance to depositors in U.S. commercial banks and savings institutions.
An area of the U.S. Department of Housing and Urban Development (HUD) that insures low down payment mortgages granted by some lenders. The loan must meet the established guidelines of FHA in order to qualify for the insurance.
An FHA Mortgage is a type of loan backed by a government agency known as the Federal Housing Authority. This type of loan is intended to make homeownership more accessible to a wider group of people, with lower down payments and more flexible financial requirements.
Policy committee in the Federal Reserve System that sets short-term monetary policy objectives for the Fed. The committee is made up of the seven governors of the Federal Reserve Board, plus five of the 12 presidents of the Federal Reserve Banks.
The central banking system of the United States, which regulates the U.S. monetary and financial system.
A mortgage for which the Federal Housing Administration (FHA) and the originating lender share the risk of loss in the event of the borrower’s default.
A mortgage insured by the Federal Housing Administration (FHA). FHA loans are also known as government mortgages.
A type of credit score created by the Fair Isaac Corporation used by lenders to help assess an individual’s credit risk.
A fee representing the cost of credit, or the cost of borrowing, which is included in most consumer credit agreements.
A professional who helps individuals manage their finances by providing advice on money issues such as investments, insurance, mortgages, college savings, estate planning, taxes, and retirement, depending on the client's needs.
An interest rate that does not change over the life of the loan or investment.
A home loan that has a fixed interest rate for the entire term of the loan.
An inspection to determine if a property is located in an area prone to flooding also known as a flood plain. The federal government determines whether an area is in a flood plain. Lenders generally rely on the flood certification to determine if flood insurance will be required in order to obtain a mortgage. For our comparison purposes, the cost of the flood certification is considered to be a third party fee, though you may find that all lenders do not pass this fee on to the borrower.
The legal process by which a lender attempts to recover the amount owed on a defaulted loan by taking ownership of the mortgaged asset and selling it.
The sequence of legal steps a lender takes to enforce the right to sell a property to recover an unpaid loan.
The loss of money, or anything else of value, due to a breach of legal obligation or contract.
A notice placed on a credit report that alerts credit companies to verify the identity before extending credit in the name of the person who has set the alert to prevent fraud.
An adjustable-rate mortgage (ARM) with monthly payments that are sufficient to liquidate the remaining principal balance over the amortization term.
A legal process whereby payments towards a debt owed by an individual can be paid by a third party - which holds money or property that is due to the individual - directly to the creditor.
The annual rate of interest for a loan. Also called the interest rate.
The total income from all sources before deductions, taxes, and expenses.
A person or entity that agrees to be responsible for another's debt or performance under a contract, if the obligated party does not perform.
A line of credit secured by the equity in a homeowner's primary residence, available for use when needed.
A type of loan in which the borrower uses the equity of their home as collateral. It is sometimes called a second mortgage.
A loan used to finance home renovations and repairs, often secured by the equity in the home.
HUD, also known as the U.S. Department of Housing and Urban Development, insures home mortgage loans made by lenders meet minimum standards for such homes.
Also referred to as the closing statement or the settlement statement, this is the document that provides line by line detail of the financial details related to a specific real estate transaction such as the fees paid by the seller and the buyer for a purchase transaction or the fees paid by the borrower for refinances.
Median family income for a particular county or metropolitan statistical area, as estimated by the Department of Housing and Urban Development (HUD).
The fraudulent acquisition and use of a person’s private identifying information, usually for financial gain.
The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.
A loan that is repaid with regularly scheduled payments, or installments. Each payment includes a portion of the principal and a portion of the interest.
The amount of money an individual or business pays for an insurance policy.
The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.
An arrangement where the property seller, borrower or other party deposits money to an account so that it can be released each month to reduce the borrower's interest rate or monthly payments during a specified period of a loan.
Short for interest rate reduction refinance loan, an IRRRL is a type of VA loan program that allows servicemembers to refinance their mortgage to a lower rate (and by extension, lower monthly payments). Compared with conventional refinance options, IRRRLs typically have more strict requirements and faster processing times.
A payment option that allows a borrower to pay only the interest due on a loan for a specified time, usually the beginning of the loan term.
The act of allocating resources, usually money, with the expectation of generating an income or profit.
A tax-advantaged investing tool that individuals use to earmark funds for retirement savings.
The process of transferring funds from a retirement account into a traditional IRA or a Roth IRA, often without incurring tax penalties.
A bank or brokerage account that is shared between two or more individuals who all have the right to contribute funds, withdraw money, and manage the account.
Credit extended to two or more persons based on their combined financial status and credit histories.
A charge a borrower incurs when a payment is not received on or before the due date.
A fee charged for a payment that is made after its due date.
A contract by which one party conveys land, property, services, etc., to another for a specified time, usually in return for a periodic payment.
The minimum reserves that must be held by a financial institution, not to be used for investments or lending.
An organization or person that lends money.
A right to keep possession of property belonging to another person until a debt owed by that person is discharged.
A refinance transaction in which the mortgage amount generally is limited to the sum of the unpaid principal balance of the existing first mortgage, closing costs (including prepaid items), points, and the amount required to satisfy any mortgage liens if the documented proceeds of the subordinate financing were solely used to acquire the property (if the borrower chooses to satisfy them), and other funds for the borrower's use (as long as the amount does not exceed the lesser of $2,000 or 2% of the principal amount of the new mortgage).
An arrangement between a financial institution and a customer that establishes the maximum loan amount the customer can borrow.
Assets in the form of cash or which can quickly be converted to cash.
The ease with which an asset, or security, can be converted into ready cash without affecting its market price.
A contract between a borrower and a lender outlining the terms and conditions of the loan.
A charge assessed for certain risk factors; most commonly low credit scores, high loan-to-value (LTV), and property type. Other risk factors may also affect LLPAs.
A change made to the terms of an existing loan by a lender as a response to a borrower's long-term inability to repay the loan.
A representative of a bank, credit union, or other financial institution who assists and advises on the application for loans.
The process by which a mortgage lender creates a mortgage secured by real property.
The amount of money that is loaned and must be repaid, not including the interest.
The duration of time over which a loan agreement is in force, and before or at the end of which the loan should either be repaid or renegotiated for another term.
Written agreement in which a lender guarantees a specific interest rate if a loan closes within a set period of time. The lock-in may also specify the number of discount points to be paid at closing.
The time period during which a loan's interest rate or loan terms cannot be changed, often associated with mortgage loans.
The current value at which an asset or service can be bought or sold in a marketplace.
The date on which the principal amount of a bond, draft, loan, or other financial instrument becomes due and is to be paid off.
An employee of a credit union who assists members with their accounts and other financial services.
The lowest amount of money that a customer must have in an account to qualify for some service, benefit, or to avoid a fee.
A type of savings account that usually earns a higher amount of interest than a regular savings account.
A printed order for payment of a specified sum, issued by a bank or post office.
A loan secured by the collateral of specified real estate property that the borrower is obliged to pay back with a predetermined set of payments.
An individual or company that is in the business of brokering mortgage loans for individuals or businesses.
A policy that compensates lenders or investors for losses due to the default of a mortgage loan.
MIP is a requirement on all Federal Housing Administration (FHA) loans, even if your down payment equals or exceeds 20%. It includes an up-front mortgage insurance premium (UFMIP) as well as an annual premium that is paid monthly.
A type of term life insurance often bought by mortgagors. In the event that the borrower dies while the policy is in force, the debt is automatically repaid by insurance proceeds. Not to be confused with mortgage insurance.
Also known as discount or buydown points, mortgage points can be used by homebuyers to offset the cost of a mortgage. These points are technically prepaid interest that you pay upfront at closing in exchange for a lower interest rate and decreases your monthly mortgage payment amount.
A fee or tax charged by some state and local governments when a mortgage is obtained. For our comparison purposes, the mortgage registration fee is considered to be a tax and other unavoidable fee.
A tax charged by some state or local governments that is paid to the state when a mortgage is obtained. For our comparison purposes, the mortgage tax is considered to be a tax and other unavoidable fee.
A residential mortgage on a dwelling that is designed to house more than four families, such as an apartment complex.
The federal agency that charters and supervises federal credit unions and insures savings in federal and most state-chartered credit unions.
An increase in the principal balance of a loan caused by making payments that fail to cover the interest due.
The difference between the assets and liabilities of an individual or company.
A term used when an account does not have enough money to cover a check or electronic withdrawal.
A service provided by a notary public to authenticate documents, administer oaths, and perform other administrative functions.
An agreement between a buyer and seller to purchase real estate. An offer to purchase, also known as a binder or a sales contract, secures the right to purchase real estate upon agreed terms for a limited period of time. If the buyer changes his mind or is unable to purchase, the earnest money that was paid is forfeited unless the binder expressly provides that it is to be refunded.
Banking activities that can be performed over the internet, including transactions, payments, and account management.
A deficit in a bank account caused by drawing more money than the account holds.
A fee charged when a withdrawal from an individual's bank account exceeds the available balance.
A banking service that covers checks or other withdrawals from an account, even if sufficient funds are not available, to prevent an overdraft.
The monthly principal and interest payment required when repaying a mortgage in accordance with its terms.
Person-to-person payment services that allow individuals to send and receive money electronically.
A loan that offers a lower-cost alternative to traditional payday loans, offered by credit unions.
The date by which a payment must be made on an account, loan, or credit card.
The total amount that must be paid to completely satisfy the terms of a loan agreement.
An unsecured loan borrowed from a bank, credit union, or online lender that can be used for any purpose.
Fees that are collected by the lender in exchange for a lower interest rate. Commonly called discount points, each point is equal to 1% of the loan amount. For our comparison purposes, a discount point is considered to be a lender fee. To determine if it is wise to pay discount points to obtain a lower rate, you must compare the up-front cost of the points to the monthly savings that result from obtaining the lower rate.
A collection of financial investments like stocks, bonds, commodities, cash, and cash equivalents, including mutual funds and ETFs.
A lender’s conditional agreement to lend a specific amount under certain terms in advance of a purchase.
The repayment of a loan before it is technically due, often incurring no penalty.
A fee charged to a borrower who pays off a loan before its due date.
The interest rate that commercial banks charge their most credit-worthy customers.
The amount of money originally loaned, which must be repaid apart from any interest or fees.
The payment required to repay a mortgage in accordance with its terms. Sometimes referred to as "P&I".
The outstanding balance of principal on a loan, excluding interest and fees.
The four elements of your mortgage payment are principal (how much you borrowed), interest (the finance rate at which you purchased your mortgage), taxes (how much you owe the government), and insurance (the costs to protect your investment). Sometimes you will hear about P&I—that just means principal and interest. It is important to keep all four of these factors in mind when planning your budget.
A statement that discloses a company's practices regarding the collection and sharing of customer data.
A legal document that outlines how a company handles and protects personal information gathered from its customers.
PMI is used with conventional loan borrowers that have a down payment less than 20%. It is typically paid as a monthly fee that is included in your monthly mortgage payments.
A financial instrument that contains a written promise by one party to pay another party a definite sum of money either on demand or at a specified future date.
Taxes based on the assessed value of the home, paid by the homeowner for community services such as schools, public works, and other costs of local government. Sometimes paid as a part of the monthly mortgage payment.
The annual rate of interest for a loan. Also called the interest rate.
The maximum amount that an interest rate can change, either at an adjustment period or over the entire life of the loan. Commonly associated with an adjustable rate mortgage (ARM).
The process of ensuring that two sets of records (usually the balances of two accounts) are in agreement.
Automatic transfers scheduled to occur on a regular basis, such as monthly or weekly.
To exchange something, such as bonds or coupons, for money or goods.
The process of replacing an existing loan with a new loan, typically with better terms.
A charge assessed by a lender to process a new loan used to pay off an existing loan.
A federal regulation that limits the number of transfers and withdrawals from certain types of bank accounts.
The process by which a creditor legally takes possession of property because the borrower has failed to keep up with payment obligations.
The minimum amount of reserves a bank must hold against deposits, as mandated by regulations.
A type of credit that does not have a fixed number of payments, such as credit card debt.
The exposure to potential financial loss or gain, often evaluated in terms of probability and severity.
A type of IRA where contributions are taxed, but withdrawals during retirement are tax-free.
A nine-digit number used by banks to identify specific financial institutions within the United States.
A secured box located within a bank that customers can rent to store valuable items or documents.
A legal process in which a portion of an employee's earnings is withheld by an employer for the payment of a debt.
A deposit account held at a bank or other financial institution that provides principal security and a modest interest rate.
A government bond that offers a fixed rate of interest over a fixed period of time.
A loan backed by collateral, reducing the risk faced by the lender.
A financial asset, such as stocks or bonds, that can be traded in the financial market.
A fee collected to pay for services related to the primary product or service being purchased.
A meeting of parties involved in a real estate transaction to finalize the process. In the case of a purchase, the settlement usually involves the seller, the buyer, the real estate broker and the lender. In the case of a refinance, the settlement involves the borrower and the lender. Sometimes referred to as the closing or the close of escrow.
A fee charged by a title company, closing agent or attorney to act as a representative and agent for the lender to perform the closing of a real estate transaction.
Also referred to as the HUD-1 or the closing statement, this is the document that provides line by line detail of the financial details related to a specific real estate transaction such as the fees paid by the seller and the buyer for a purchase transaction or the fees paid by the borrower for refinances.
A form of authentication issued by banks and other financial institutions to prevent fraud in the transfer of securities.
A type of unsecured loan that is backed only by the borrower's creditworthiness, rather than by any type of collateral.
A program offered by financial institutions allowing consumers to skip or defer a monthly payment without a credit penalty.
A record provided by a bank or financial institution, detailing the transactions, fees, and balances associated with an account.
An order given to a bank to halt the payment or processing of a check, typically because it has been lost or stolen.
A type of loan designed to help students pay for post-secondary education and the associated fees, such as tuition, books and supplies, and living expenses.
A loan offered to individuals who do not qualify for prime rate loans, typically because of a low credit score or other risk factors.
A loan on which the government pays the interest while the borrower is in school, during the grace period, and during any deferment periods.
A fee associated with obtaining a precise measurement of a piece of property by a licensed surveyor. The survey is typically a written map of the property showing locations of buildings and boundaries. In some states a survey is required by a title company to issue a title insurance policy. For our comparison purposes, a survey fee is considered to be a third party fee and may be included in the title insurance fee by some lenders.
A fee charged by a title company to issue an insurance policy without requiring that a full survey be completed. For our comparison purposes, a survey affidavit fee is considered to be a third party fee and may be included in the title insurance fee by some lenders.
The total value of property, income, or other taxable assets subject to taxation.
A tax charged by some state or local governments at the time of transfer of real estate title from one owner to another. For our comparison purposes, these fees are considered to be a tax or other unavoidable fee.
A fee charged to a borrower by a lender so that another company will assume responsibility for verifying the amount of real estate taxes due and that taxes have been paid over the life of the loan. For our comparison purposes, a tax service fee is considered to be a third party fee, however, some lenders may not charge for this service.
Refers to investments on which applicable taxes are paid at a future date, allowing earnings to be reinvested and grow tax-free in the interim.
Income or transactions that are free from tax at the federal, state, or local level.
A deposit held at a financial institution that has a fixed term and usually earns higher interest than a standard savings account.
A loan from a bank for a specific amount with a specified repayment schedule and a fixed or floating interest rate.
Third party fees are usually fees that the lender will collect and pass on to the person who actually performed the service. For example, an appraiser is paid the appraisal fee, a credit bureau is paid the credit report fee and a title company or an attorney is paid the title insurance fees. Fees that we consider third party fees include the appraisal fee, the credit report fee, the settlement or closing fee, the survey fee, tax service fees, title insurance fees, flood certification fees, and courier/mailing fees. Typically, you’ll see some minor variances in third party fees from lender to lender since a lender may have negotiated a special charge from a provider they use often or chooses a provider that offers nationwide coverage at a flat rate. You may also see that some lenders absorb minor third party fees such as the flood certification fee, the tax service fee or courier/mailing fees.
A legal document evidencing a person's legal right to ownership of a property.
A company that specializes in examining titles to real estate and issuing title insurance.
A fee charged by a title company or attorney in some states to cover the cost of searching the public record to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue assessments, or other claims filed that would adversely affect the transfer of the title. For our comparison purposes, a title examination fee is considered to be a third party fee and may be included in the title insurance fee by some lenders.
The total amount of income earned over a year before any deductions are made.
The sum of all interest payments made on a loan over a certain period of time.
An agreement between a buyer and a seller to exchange goods, services, or financial instruments.
A charge assessed for transferring an asset or servicing a loan from one party to another.
One of the three major consumer credit reporting agencies, which provides credit information and services to potential creditors.
A federal law designed to promote informed use of consumer credit by requiring disclosures about its terms and cost.
The process by which lenders and insurers evaluate the risks associated with a potential borrower or insured and establish the terms of a loan or insurance policy.
A loan that is issued and supported only by the borrower's creditworthiness, rather than by any type of collateral.
A loan for which the borrower is fully responsible for paying the interest, regardless of the loan status.
The illegal action or practice of lending money at unreasonably high rates of interest.
The Department of Veteran’s Affairs (VA) charges a Funding Fee to most veterans who obtain a VA mortgage loan to help sustain the VA home loan program. Only veterans receiving VA disability are exempt from paying this fee. The VA Funding Fee is a percentage of the principal loan amount and is due at closing. The amount of the VA Funding Fee varies depending on specifics of the transaction. The full amount can usually be financed as part of the loan amount or paid in cash.
A mortgage for veterans and service persons. The loan is guaranteed by the Department of Veterans Affairs (VA) and requires low or no down payment.
An interest rate that can change, based on changes in a corresponding financial index that's associated with the loan.
A loan to purchase a new or used car.
The process by which an employee accrues non-forfeitable rights over employer contributions made to the employee's retirement plan account or pension plan.
A payment made by a debtor that is not required by a legal obligation.
An electronic transfer of funds across a network administered by hundreds of banks around the world.
A limit on the amount of money that can be withdrawn from an account within a given time frame.
The income return on an investment, such as the interest or dividends received from holding a particular security.
A digital payments network that allows customers to transfer money online.
When a bank account has no funds available.
A bond that does not pay periodic interest, instead being sold at a discount to its redemption value.
Old debt that is past the statute of limitations or is no longer owed and has been sold to a collection agency to try to collect on it.