Glossary of Terms

Account Balance

The balance in an account at the beginning of each business day; includes all deposits and withdrawals that were posted from the previous night, whether or not funds have been collected. See also Glossary term, "collected balance."

Account Statement

A printed or online statement of all the debit and credit transactions on an account for a given statement cycle.

Active Account

A bank account in which there are recent transactions.

Annual Percentage Yield (APY)

A percentage rate reflecting the total amount of interest paid on a deposit account (checking, savings, CDs, IRAs), based on the interest rate and the effect of interest compounding for one year.

Automated Clearing House (ACH)

A nationwide electronic funds transfer network that enables participating financial institutions to distribute electronic credit and debit entries to bank accounts and to settle such entries.

Automatic Funds Transfer

An arrangement that moves funds from one account to another automatically on a pre-arranged schedule; for example, every payday or once a month.

Automatic Payment

An arrangement that authorizes payments to be deducted automatically from a bank account (usually a checking account) to pay bills (such as insurance payments, rent, mortgage or loan payments). Payments are usually scheduled to be made on a certain day of the month.

Available Balance

The amount of money in an account that is available for immediate use.

Average Daily Balance

The average amount in a deposit account that equals the sum of the daily account balances during an accounting period, usually a monthly statement cycle, divided by the number of days in the period. Can sometimes be used to calculate whether a service charge applies or to qualify for special services. See also Glossary term, "minimum daily balance."

Banking Center, Branch, or Office

A Bank branch office. See ATM & Banking Center Locator.

Bill Pay

Bill Pay is a service of Online Banking that allows you to pay your bills online. In addition you can elect to receive e-Bills - electronic versions of your paper bills - from your credit card and a variety of companies like AT&T Long Distance, Sears and Texaco. See the list of companies currently offering e-Bills.

Bounced Check

A check which a bank returns unpaid because there are not enough available funds in the account.

Cancelled Check

A check that has been paid. A cancelled check may generally be used as proof of payment.

Cashier's Check or Official Check

A check drawn on and issued by a bank. It does not usually bounce because its face amount is paid to the bank when it is issued and the bank then assumes the obligation.

Certificate of Deposit (CD)

A time deposit that is payable at the end of a specified term. CDs generally pay a fixed interest rate and generally offer a higher interest rate than other types of deposit accounts. Terms can range from 7 days to 10 years. CDs are insured by the FDIC up to the maximum allowed by law. If an early withdrawal from the CD prior to the end of the term is permitted, a penalty is usually assessed. Usually interest is accrued daily and paid at maturity, unless a specified period is chosen such as monthly or quarterly; however, this normally also means a lower rate of interest would be paid.

Certified Check

A check for which the bank guarantees payment.

Checking Account

A type of deposit account, sometimes interest bearing, which enables customers to place funds and withdraw their available funds on demand, typically by writing a check.

Check Card or Debit Card

A plastic card issued by the bank or its agent that customers can use anywhere Visa or MasterCard debit cards are accepted. Because money is deducted directly from a designated checking account, there are no finance charges. A Debit Card can also be used at ATMs so there is no need to carry both a Debit Card and an ATM card. Also referred to as a debit card.

Check Image

A service where you receive images of the front of your cancelled checks. Each account statement includes images of checks (up to 10 per page) that posted to your account during the statement cycle. You can view and print copies of the front and back of checks posted within the last 180 calendar days by signing on to Online Banking, or you can request check copies by visiting your nearest banking center, or by calling the customer service number on your statement.

Check Safekeeping

A service where the bank keeps a copy or digital image of cancelled checks for 7 years instead of returning them with the account statement. You can view photocopies of your cancelled checks that posted within the last 180 days by signing in to Online Banking or by visiting your nearest banking center.

Collected Balance

The balance in a deposit account, not including deposited items that have not yet been paid, or collected. See also Glossary term, "account balance."

Combined Balance or Linked Account

Any combination of balances from linked accounts, such as savings, checking, and CDs. Can be used to meet the balance required to waive the monthly fee on some service fees and checking accounts.

Compound Interest

Interest that is calculated not only on the principal balance in the account, but also on the accumulated interest. The more frequently interest is compounded, the higher the effective yield.

Credit

A financial term that refers to an increase in a deposit account balance (such as a deposit made to the account). See also Glossary term, "debit."

Credit Card

A plastic card issued to an individual for the purpose of purchasing goods and services using credit; a credit limit is established for each card holder.

Check Enclosure

A service where the bank returns the checks with the account statement. This service generally assesses fees based on number of checks and an hourly rate for manual or special handling preparation.

Custodial Account

An account created for the benefit of a minor with an adult as the custodian.

Debit

A financial term that refers to a decrease in a deposit account balance, such as a check posted to the account. See also Glossary term, "credit."

Debit Card

A plastic card issued by a bank which customers can use anywhere Visa or MasterCard debit cards are accepted. Because the money is deducted directly from a designated checking account, there are no finance charges. A debit card can also be used at ATMs so there is no need to carry both a debit card and an ATM card. See also Glossary term, "Check Card."

Deposit

Money added into a customer's account at a financial institution.

Direct Deposit

With direct deposit, your recurring deposits are made electronically into your checking, savings or money market account. Deposits can include salary, pension, Social Security and Supplemental Security Income (SSI) benefits, or other regular monthly income.

Disclosures

Information pertaining to the account services, fees and regulatory requirements.

Electronic Funds Transfer (EFT)

Any transfer of funds initiated by electronic means, such as an electronic terminal, telephone, computer, ATM or magnetic tape.

Emergency Cash

A service provided by Visa or MasterCard personal Debit Card customers. Worldwide emergency cash replacement services are available 24 hours a day, 365 days a year. The emergency cash is delivered directly to you or to a convenient location where you can get it.

Federal Deposit Insurance Corporation (FDIC)

The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the United States government. The FDIC protects depositors against the loss of their insured deposits if an FDIC-insured bank or savings association fails. FDIC insurance is backed by the full faith and credit of the United States government.

The FDIC guarantees deposit accounts (checking, savings, money market savings and CDs) up to the maximum allowed by law. In October 2008, the FDIC temporarily increased basic deposit insurance from $100,000 to $250,000 per depositor through December 31, 2013. The FDIC separately guarantees bank individual retirement accounts (IRAs) up to $250,000 per owner.

Float

The amount of time represented by checks that are in transit between the date they are deposited to an account and the date they are paid. The time between deposit and payment of the check is referred to as the float.

Inactive Account

A bank account in which there have not been any transactions for an extended period of time, generally during a six-month time period. The account in which there is no activity for one-year is considered a "Dormant" account and transactions may be prevented to assess that the transaction is authorized, and to prevent identity theft. In some cases (no activity within the period specified by state law, generally at least three years), the law requires a bank to turn the account over to the state as unclaimed property.

Interest Bearing

An account that earns interest is an interest bearing account.

Interest Rate

The rate paid on an interest-bearing account, such as savings, CDs and some checking accounts; also, the rate charged on a loan or line of credit. Different types of accounts and loans pay or charge different rates of interest.

Joint Account

Any account owned by two or more people.

Jumbo CD

Same as Certificate of Deposit (CD), except the deposit amount usually is a minimum of $100,000.

Linked Account or Combined Account

Any account linked to another account at the same financial institution so that funds may be transferred electronically between accounts, and, in some cases, the combined balance may be used to help meet the balance required to waive a monthly service charge on one of the accounts.

Maturity Date

Date when the term of your CD ends. The Maturity Date is date that the CD term expires or matures from the date opened, such as a one-year term CD, or a 30-day term CD.

Minimum Daily Balance

The lowest end-of-day balance in an account during a statement cycle. It is often required to be kept in an account each day to earn interest, avoid a service charge or qualify for special services. See also Glossary term, "average daily balance."

Money Market Account

A savings account that generally permits up to six third-party withdrawals by check or debit card each statement cycle. Excess debit fees may be fewer or equal to six. This account is subject to Regulation D, limited third-party transactions. See Truth-in-Savings disclosures.

Money Order

A financial instrument, issued by a bank or other institution, allowing the individual named on the order to receive a specified amount of cash on demand. Often used by people who do not have checking accounts.

Monthly Maintenance Fee

The fee charged to maintain a particular account, such as a checking account. The Bank offers a variety of options to avoid the maintenance fees on checking and savings accounts.

Non-bank ATM

An ATM or cash machine that does not prominently display a bank's name or logo. Fees generally apply to cash withdrawals at non-bank ATMs. Non-bank ATMs generally do not accept deposits.

Online Banking

A service that allows an account holder to obtain account information and manage certain banking transactions, including bill payment through a personal computer or hand-held device, such as a mobile phone.

Original Interest Rate

Rate assigned when the CD account is opened. The Original Interest Rate is listed on your CD account receipt and statement.

Overdraft

An overdraft occurs when you do not have enough available funds in your account to cover a check or other withdrawal, but the bank pays the items and overdraws your account. See "Overdraft Protection."

Overdraft Protection

A service that allows a checking account to be linked or combined with another account that helps provide protection against returned items or overdrafts. When your checking account does not have sufficient available funds to cover a check, funds are automatically transferred from the available balance in the linked or combined account to cover the check. Choices can include using a savings account or a money market account as the linked or combined account to provide overdraft protection.

Personal Identification Number (PIN)

Personal Identification Numbers (PINs) are numbers that customers use with their ATM or Debit Card to access their accounts via ATMs or to make purchases with their Debit Card. These numbers should always be kept confidential.

Preferred Rate

You are eligible to receive this rate if you have any of the following accounts or relationships: Loan, money market account, savings account, commercial account analysis account, or business checking account.

Returned Item

When you do not have enough available funds in your account (including any overdraft protection transfer from another account) to cover a check, the bank may decide not to pay the check and to return it to the payee. A returned item fee may be charged to your account. See your account terms and conditions agreement for additional information.

Savings Account

A deposit account which pays interest, but funds cannot be withdrawn by check writing.

Simple Interest

The interest calculated on a principal sum, not compounded on earned interest.

Stop Payment

When you ask a bank not to pay a check or payment you have written or authorized. Stop payments are generally placed on lost or stolen checks or on checks related to disputed purchases. Stop payment orders generally expire after 6 months and a fee usually applies. Stop Payments must be certified as eligible or legitimate requests. If a range of checks were lost or stolen, you may be asked to open a separate account and close the account that checks were lost or stolen, to avoid identity theft, and reduce the risk of loss.

Time Deposit or CD

An account for a fixed term with the understanding that the funds will remain on deposit until the end of the term. Penalties for early withdrawals may apply.

Transaction Limitations (Federal Reserve Board Regulation D)

Refers to a Federal Reserve Board regulation that limits certain types of withdrawals and/or transfers from savings and money market deposit accounts. There can be no more than six preauthorized or automatic transfers, or telephone/PC transfers (including bill payments) out of the account each month; of the six, if applicable, no more than six limited transfers may be by check or debit card. Withdrawals at ATMs and teller windows from these accounts are unlimited. Excess debit fees greater than or less than six third-party debits may be imposed. Refer to the Truth-in-Savings disclosures. The Bank is responsible for ensuring these transaction limitations are enforced, and if repeated excess transactions are made during any consecutive four-week periods the Bank may be required to convert your account to a checking account that you are eligible for, or close the account.

Transfer

A movement of funds from one account to another.

Travelers Cheque

Check issued by a financial institution which functions as cash but is protected against loss or theft. Useful when traveling. Also referred to as traveler's checks.

Uncollected Funds

Refers to items deposited in an account that have not yet been collected, or paid, by the bank on which they were drawn.

Variable Rate

An interest rate that may fluctuate during the term of a loan, line of credit or deposit account. Sometimes the rate changes based on changes in an index rate, such as the prime rate or other prescribed criteria. Sometimes the bank changes the rate at its own sole discretion.

Wire Transfer

An electronic payment service for transferring funds by wire (for example, through the Federal Reserve Wire Network or the Clearing House Interbank Payments System).

Withdrawal

A removal of funds from an account.

Adjustable-Rate Mortgage (ARM)

A mortgage or home equity loan in which your interest rate and monthly payments may change periodically during the life of the loan, based on the fluctuation of an index. Lenders may charge a lower interest rate for the initial period of the loan. Most ARMs have a rate cap that limits the amount the interest rate can change, both in an adjustment period, and over the life of the loan. Also called a variable-rate mortgage.

Amortization

The gradual reduction in the principal amount owed on a debt. During the earlier years, most of each payment is applied toward the interest owed. During the final years of the loan, payment amounts are applied almost exclusively to the remaining principal, unless there has been negative amortization.

Amortization Table

A time table or schedule to give you a breakdown of your monthly payments into principal and interest. You can use this schedule to figure out the amount of principal you'll repay during your mortgage term.

Amortization Term

The amount of time required to amortize (or pay off) the loan. The amortization term is expressed in months. For example, for a 15-year fixed-rate mortgage, the amortization term is 180 months.

Annual Fee

An annual amount you pay for having an open line of credit.

Annual adjustment cap

A limit on how much the variable interest rate on a loan can increase or decrease each year.

Annual Income

The total amount of income earned in one year. This does not need to include alimony, child support or separate maintenance income unless you wish to have it considered as a basis of repaying this obligation.

Annual Percentage Rate (APR)

The annual cost of a loan to a borrower. Like an interest rate, the APR is expressed as a percentage of the loan amount. Unlike an interest rate, however, it includes other charges or fees to reflect the total cost of the loan. The Federal Truth in Lending Act requires that every consumer loan agreement disclose the APR. Since all lenders must follow the same rules to ensure the accuracy of the APR, borrowers can use the APR as a good basis for comparing certain costs of loans.

Application Fees

Non-refundable fees paid when you apply for your loan. They may include charges for property appraisal, a credit profile and so forth.

Appraisal, Appraised, or Appraised Value

An informed estimate of the value of property. When made in connection with an application for a loan secured by a home, it's usually made by a professional appraiser. It's sometimes called a property valuation.

Appraisal Fee

The charge for estimating the value of property.

Appreciation

An increase in the value of property over time. Important factors in a home's appreciation are its location and condition, and the selling price of similar homes in the area. Appreciation increases the amount of equity, which may also increase the amount you can borrow. The opposite of depreciation.

Asset

Property or a possession of value that a lender may be willing to accept as collateral to secure repayment of debt. For example, real estate, stocks, mutual funds, cash and automobiles are all assets.

Assumable

When you sell your home, your buyer may be able to qualify to take over your existing mortgage at your current rate. This can be beneficial if interest rates have risen above the rate you're currently paying on your mortgage. The lower-interest rate benefit may make your home more affordable to prospective homebuyers.

Available Funds

The total amount of funds available to you from your own funds and/or other sources that can be used for your down payment and the closing costs associated with a loan.

Balance Sheet

A dated financial statement (in table form) that shows your assets, liabilities and net worth.

Balloon Loan

A short-term loan with smaller payments for a certain period of time, and one or more large payments for the remaining principal amount, due at a specified time.

Balloon Payment

A lump-sum payment, which is larger than your regular periodic payment, that's paid at the end of your loan repayment period.

Bankruptcy

A proceeding in federal court altering or eliminating an eligible individual's obligations to repay some or all of his or her creditors. A borrower may relieve debts by transferring his or her assets to a trustee. Different chapters or types of bankruptcy exist. If a person files bankruptcy, a record of the filing appears on the borrower's credit report for up to 10 years.

Base Rate

The underlying interest rate used as a benchmark, or index, for pricing variable-rate loans such as adjustable-rate mortgages, auto loans or credit cards.

Basis Point

An amount equal to 1/100th of a percentage point. For example, a fee calculated as 50 basis points of $200,000 would be 0.50% or $1000.

Bi-weekly

Every other week. Some loans offer a bi-weekly payment option, which requires 26 half payments per year (amounting to one additional full payment each year). This option allows you to pay your loan off more quickly and to build equity faster. Sometimes there are costs associated with choosing this option.

Breach

A violation of any legal obligation or contract.

Broker

A third party who helps arrange funding or negotiates a contract between parties, but does not lend the money himself or herself.

Buydown

A buydown is the prepayment by a lender or homebuilder of a portion of the interest that will become due on your promissory note during the buydown period, thereby reducing your monthly payments. The buydown period may be one, two or three years, during which time your monthly payments will increase annually, in accordance with a predetermined schedule, ending with the monthly payment specified in your note.

Cap

A limit on how much a variable interest rate can increase. Many adjustable rate mortgages have both annual (or semi-annual) rate caps and lifetime caps. They limit the amount your payments can increase in an adjustment period and over the life of the loan.

Capitalized Cost

The amount financed under a lease agreement.

Closing

The time and place at which all documents for your loan are signed, dated and notarized. Also called a settlement.

Closing costs

Fees paid at or prior to the closing of your loan. They may include attorneys' fees, as well as fees for preparing and filing a mortgage, and for taxes, title search, and insurance. They include the expenses incurred in obtaining the loan and in transferring the ownership of any collateral property from the seller to the buyer. Generally closing costs range from 2% to 6% of the mortgage amount.

Co-borrower

An additional person who assumes equal responsibility for repayment of a loan and is fully obligated under the terms of the loan. This person also has equal rights to the proceeds of the loan.

Collateral

An asset, such as a car or a home, used for securing the repayment of a loan. The borrower risks losing the asset if the loan is not repaid.

Combined liens

The outstanding balance of all mortgages held on a property. Used to determine the total available equity when considering the appraised value of the property less total combined or outstanding liens.

Combined Loan-to-Value Ratio (CLTV)

The ratio between the unpaid principal amount of your first mortgage, plus your home equity loan – or your credit limit in the case of a line of credit – and the appraised value of your home. Expressed as a percentage.

Commission

The fee charged by a broker or agent for negotiating a real estate or loan transaction. A broker commission is generally a percentage of the price of the property or loan.

Condominium or Condo

A building or development with many housing units where each person owns his or her individual unit and shares an interest in the common areas and facilities of the entire project. You go through the same process of buying a condo as you do when buying a house, and have a deed to and a mortgage on your particular unit. You also pay property taxes on your unit.

Conforming Loan

A mortgage loan that has the standard features as defined by and is eligible for sale to Fannie Mae and Freddie Mac.

Contingency

A specified condition that the sales contract requires must be satisfied before the home sale can occur. When buying a home, the two most common contingencies are that the house must pass inspection and that the borrower must be approved for a loan.

Contract

An oral or written agreement to do, or not to do, a certain thing.

Co-signer

A second person who signs your loan and assumes equal responsibility for payment of the loan but receives no benefit from the loan proceeds.

Cost Benefit Analysis

A dollar-value analysis that compares the benefits of owning a home to the costs. Some home ownership benefits may include: tax savings you may receive on the mortgage interest and property taxes you pay; and the appreciation that may occur in the value of your home over time, building your home equity. Home ownership costs may include: interest you pay on the loan; closing costs, including any mortgage points; property taxes and homeowner's insurance premiums; private mortgage insurance premiums; and maintenance costs including those associated with normal wear and tear and weathering.

Credit

An arrangement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date.

Credit Reporting Agency or Credit Bureau

An organization that gathers, records, updates and stores financial and public records of individuals who have been granted credit and provides this information to lenders and other authorized users for a fee.

Credit History

A record of an individual's debts and payment habits over time. It helps a lender determine whether or not a potential borrower is a good business risk.

Credit Limit

The maximum amount you can borrow under a line of credit.

Credit Report

A record of an individual's debts and payment habits. It helps a lender determine whether or not a potential borrower is a good business risk.

Credit Score

A number, rating the quality of an individual's credit. Lenders calculate this number, often with the assistance of computer systems, as part of the process of assigning rates and terms to the loans they make.

Creditor

A person or business from whom you borrow or to whom you owe money.

Creditworthiness

The likely ability of a borrower to repay debt.

Debt

An amount of money owed by one person, company, organization or other entity to another.

Debt consolidation

A single loan to pay off multiple debts, usually over a longer term. This is a popular use of home equity loan or line of credit.

Debt-To-Income Ratio (DTI), or Debt Service Coverage Ratio (DSCR)

The percentage of your total debt compared to your total income before taxes. Many lenders like to see your debt (including your mortgage payments) be no more than 40% of your total income.

Deed (Warranty or Quit-Claim)

A document that legally transfers ownership of real estate from a seller to a buyer. It's delivered to the buyer at closing. Before making a loan, a lender will usually require a title search or a title report to make sure the real estate that is to secure the loan is legally owned by the borrower.

Default

Failure to make mortgage payments on time or to meet other terms of a loan. Default can lead to foreclosure.

Delinquency

Failure to make payments on time.

Depreciation

A decline in the value of property due to wear and tear or any other reason. The opposite of appreciation.

Destination Charge

The actual costs the dealer pays for shipping and delivering a new car. The dealer then charges you this fee, with no mark-up.

Disclosures

Information given to consumers about their loans.

Discount Points

Typically, an amount paid at closing to the lender in conjunction with a mortgage loan in order to lower the interest rate. One discount point equals one percentage point of the loan amount.

Document Preparation Fee

Fee required to cover the cost of preparing the necessary documents for closing.

Document Drawn Date

The date on which your legal documents are prepared for closing.

Down Payment

The amount of cash you pay toward the purchase of your home to make up the difference between the purchase price and your mortgage loan. Down payments often range between 5% and 20% of the sales price depending on many factors, including your loan, your lender, your credit history and so forth.

Draw

The process of obtaining an advance against your available credit under your line of credit.

Draw Period

The period during which a borrower can obtain advances from the available line of credit. At the end of the draw period, borrowers may be able to renew the credit line or may be required to pay the outstanding balance in full or in monthly installments.

Equal Credit Opportunity Act (ECOA)

A federal law that requires lenders and other creditors to make credit available without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs.

Equity

The difference between the fair market value (appraised value) of your home and your outstanding mortgage balances and other liens.

Escrow

• The process of placing an amount of money and documents with a neutral third party, called an escrow agent, who's given the authority to deposit, disburse and distribute to the proper parties all the money and documents involved in a real estate transaction. The purpose is to protect both the buyer and seller in the transaction from the other side's unauthorized use of funds and ensures an arm's-length transaction between both sides.
• Also commonly used to mean an escrow account or impound account, required by many lenders and held by the lender during the term of the loan. This deposit is used to hold the borrower's advance payments toward insurance and property taxes until they become due.

Fair Credit Reporting Act (FCRA)

Congress passed this act to give consumers certain rights when dealing with consumer reporting agencies, or CRAs. CRAs are required to provide accurate credit histories to authorized businesses for use in evaluating applications for insurance, employment, credit or loans.

Fair Market Value

The likely selling price of a home between a willing buyer and a willing seller on the open market. In a mortgage or a home equity loan, the fair market value is usually determined by an appraisal.

Fannie Mae

Federal National Mortgage Association, a government-sponsored enterprise which buys and securitizes mortgages for re-sale in the secondary market.

FHA

An acronym for Federal Housing Administration, which is an agency of the Department of Housing and Urban Development. The FHA provides mortgage insurance for certain residential mortgages. It sets standards for underwriting these mortgages and for construction of homes secured by these mortgages.

FICO

An acronym for Fair Isaac Company, Inc., which develops the mathematical formulas used to produce credit scores for assessing credit risk.

Finance Charge

The finance charge is the cost of consumer credit expressed as a dollar amount. It includes the amount of interest you will pay during the terms of the loan, origination points and certain other items. Some closing costs are not treated as finance charges.

First mortgage

A mortgage that is the senior lien against a property.

Fixed-rate Option or Fixed-rate Loan Option

An option available on home equity lines of credit allowing borrowers to fix the payments and interest rate on all or a portion of their outstanding principal balance for a specific term. Customers may be charged a fee for this privilege.

Fixed-rate mortgage

A home loan with a predetermined fixed interest rate for the entire term of your loan. This means that the interest rate will never change for as long as you have the loan.

Flood Certification

A determination by a reputable source about whether property is located within a special flood hazard zone.

Flood Insurance

Insurance that protects against loss due to floods. When available, this type of insurance is required by law when a property is located within a special flood hazard zone.

Foreclosure

A legal procedure in which property securing a defaulted loan is sold by the lender in order to repay a borrower's loan. The amount paid by a buyer at the foreclosure may not be enough to fully repay the loan and the borrower may continue to owe the lender the difference.

Freddie Mac

A government-sponsored enterprise which buys and securitizes mortgages for resale in the secondary market.

Funding Date

The date on which the proceeds from a loan are available to, or disbursed for the benefit of, the borrowers.

Gift Funds

The funds a borrower receives that do not have to be paid back.

Good Faith Estimate (GFE)

An itemized, detailed list of certain estimated costs associated with a home loan that the lender is required to provide to the borrower within three business days of the application.

Gross annual income

The total amount of income from all sources (not just salary) that a borrower receives per year before deductions.

Home Equity Line of Credit (HELOC)

A line of credit secured by the equity in a borrower's residence. It can be used for home improvements, debt consolidation and other major purchases or expenses. Interest on these loans may be tax deductible. (Consult a tax advisor about tax deductibility of interest.) At closing, a credit limit is established. In most cases, the borrower can access the line of credit by a variety of access devices, such as convenience checks, debit cards and credit cards.

Home Equity Loan

An installment loan secured by the equity in a borrower's residence. It can be used for home improvements, debt consolidation and other major purchases or expenses. Interest on these loans may be tax deductible. (Consult a tax advisor regarding tax deductibility of interest.) On the funding date, all of the principal is advanced for the benefit of the borrower(s).

Home Inspection

An inspection of the condition of a property. It's conducted by a third party who knows what to look for, including all major appliances and structural elements. If an inspector finds something wrong, and your sales contract allows you to, you can request that the seller pay for the repairs. If the seller refuses, and your sales contract allows you to, you may not have to proceed with the purchase of the home.

Homeowners' Association

An organization of property owners that administers the rules and upholds the covenants of a subdivision, development or condominium complex.

Homeowners' Insurance

Insurance to protect your home against damage from fire, hurricanes and other catastrophes. Usually, homeowners' insurance also covers you against theft and vandalism, as well as personal liability in case someone is hurt or injured on your property. A lender will likely require you to name it as a payee under the insurance if you need to make a claim.

HUD

An acronym for the U.S. Department of Housing and Urban Development. HUD is a governmental agency responsible for the implementation and administration of housing and urban development programs.

Impound Account or Escrow Account

An account specifically set up by a lender to hold funds that are set aside for the payment of property taxes and insurance. These funds are held in escrow until disbursed on behalf of the borrower to the appropriate parties.

Index

When used in a note or credit agreement, the measurement used to decide how much the annual percentage rate will change at the beginning of each adjustment period. Generally, the index plus or minus margin equals the new rate that will be charged, subject to any caps. Different lenders use different index rates (cost of funds index, prime rate and so forth).

Inflation Rate

The increase in price of consumer goods, usually expressed as a percentage over a specific period of time.

Initial rate

The starting interest rate. Some people call this a teaser rate, because it gives you low interest and low monthly payments at the beginning, but may adjust up at the next adjustment period (it will usually adjust even if the index doesn't go up, since it's lower than index plus margin for the initial period).

Interest

A charge paid for borrowing money.

Interest-only Payments

Some lenders permit you to pay only the interest due on a loan for a portion of the loan term, which lowers your periodic payment, but does not decrease your principal balance on the loan. See balloon loan and balloon payment.

Interest rate

Cost for the use of a loan, usually expressed as a percentage of the loan, paid over a specific period of time. The interest rate does not include fees charged for the loan. See annual percentage rate.

Interest Rate Cap

A limit on how much the variable interest rate can increase at any one time. Many real estate loans have both annual (or semi-annual) caps and lifetime caps, which limit the amount your payments can increase in an adjustment period and over the life of the loan.

Investment Property

Property that is purchased to generate rental income, or to be sold once it's appreciated in value.

Jumbo Loan

Also known as a non-conforming loan. The amount of the loan exceeds standards that would make it eligible for sale to Fannie Mae and Freddie Mac.

Late Charge

The penalty charged to the borrower when a payment is made past the due date and any allowable grace period.

Lender

An individual or business entity making a loan.

Lien

A legal claim of a creditor on the property of another as security for a debt.

Lien Holder

An individual or entity that has placed a lien on real property.

Lifetime Adjustment Cap

A limit on how much the variable interest rate can increase during the term of a loan.

Line of Credit

An agreement by a lender to extend credit up to a maximum amount for a specified time. In a home equity line of credit, the line of credit is secured by the borrower's home.

Listing Price

The asking price of the home, or the price the home is listed for.

Liquidate

To sell assets for the purpose of accumulating cash.

Loan Application

The process of providing financial and other information (such as employment history and proposed collateral) by a prospective borrower in conjunction with a request for credit.

Loan Amount

The amount of debt, not including interest.

Loan Term

The period of time during which a loan must be repaid. For example, a 30-year fixed loan has a term of 30 years. Also called term. See maturity date.

Loan-to-Value Ratio (LTV)

The ratio between the unpaid principal amount of your loan, or your credit limit in the case of a line of credit, and the appraised value of your collateral. Expressed as a percentage.

Lock-in

A lock period refers to the amount of time prior to closing that you can secure an interest rate for your loan. Generally, lock periods range from 30 days to more than 90 days. Generally, the longer the lock period, the more you pay in points or interest.

Manufactured Housing

A structure that has been partially or entirely constructed at another location and moved onto the property (on a permanent foundation). A manufactured home may or may not be a mobile home.

Manufacturer's Rebate

Money you'll get back from the manufacturer if you buy a specific model and otherwise comply with the terms of the rebate program.

Margin

The number of percentage points the lender adds to or subtracts from the index rate to determine the interest rate.

Market Value

The likely selling price of a home between a willing buyer and a willing seller on the open market. In a mortgage or a home equity loan, the fair market value is usually determined by an appraisal. Also called fair market value.

Maturity Date

The day on which all outstanding principal, interest and fees must be repaid.

Minimum Payment

The minimum amount you must pay (usually monthly) on your account to avoid a delinquency. Some loans may permit a minimum payment of interest only. Other loans may require a minimum payment of principal and interest. Many other variations of minimum payments exist.

Mobile Home

A type of residence that's built upon a wheeled chassis that can be transported from site to site.

Modular Home

A factory-built home that's erected on-site, with the appearance and characteristics of a site-built residence.

Monthly Payment

The amount paid each month toward the principal and interest amount of a loan. The monthly payment may or may not include taxes and insurance.

Mortgage

A legal document giving a lender a lien on real estate to secure repayment of a loan. Mortgage loans generally run from 10 to 30 years, after which the loan is required to be paid off. Also called deed of trust and/or security deed.

Mortgage Insurance

Insurance that protects the lender if you default on your loan. This insurance usually costs from 0.15% to 2.5% of the loan amount. If your down payment is less than 20%, most lenders will require you to get mortgage insurance. Also called private mortgage insurance (PMI).

Mortgage Points

A point is equal to 1% of the principal amount of your loan. Mortgage points are usually collected at closing. Also called points.

Mortgagee

The lender or other party named in the mortgage as the party who's entitled to receive repayment of the home loan.

Mortgagor

The borrower, or other party named in the mortgage as the party obligated to repay the home loan.

Multi-family Residence (two to four units)

A residential property with two to four individual housing units (duplex, triplex, quadplex).

Negative Amortization

The result when monthly payments don't cover all the interest due on the loan. The unpaid interest is added to the unpaid balance, which means the homebuyer will owe increasingly more than the original amount of the loan.

Non-Conforming Loan

A mortgage loan that's not eligible for sale to Fannie Mae and Freddie Mac due to non-standard features. These loans are often sold on the secondary market to private investors or held in the lender's portfolio as an asset.

Non-Owner Occupied

Properties in which the owner does not live.

Notarize

Act by a notary public who witnesses the signing of documents, authenticating the identity of the signer.

Note

A written agreement in which the signer promises to pay to a named person or company a specific sum of money at a specified date or on demand.

Origination Date

The date on which a loan was closed. See closing.

Origination Fee

A fee imposed by a lender to cover certain processing expenses in connection with making a loan. Usually a percentage of the amount loaned (often 1%).

Outstanding Balance

The balance owed on a debt on a given day.

Owner-occupied

A property that the owner occupies either as a principal residence or second home.

Payment

The periodic amount of money to be paid by the borrower to reduce the balance of a loan. Sometimes referred to as principal and interest or P&I.

Payment Cap

A limit on how much a monthly payment can increase at any one time. Some adjustable-rate mortgages have payment caps in addition to annual (or semi-annual) interest rate caps and lifetime interest rate caps. Payment caps don't limit the amount of interest charged and may cause negative amortization. Also called a cap.

P and I

An acronym meaning principal and interest. Principal and interest accounts for the majority of your mortgage payment, but doesn't include escrow payments for taxes, insurance, and any other costs that are paid monthly, or fees that periodically come due.

Per Diem Interest

The amount of interest that accrues daily on a loan. This is calculated by multiplying the outstanding loan balance by the annual rate of interest and then dividing the result by 365.

PITI

An acronym for principal, interest, taxes and insurance. Also referred to as the monthly housing expense.

PMI

An acronym for private mortgage insurance. If your down payment is less than 20%, most lenders will require you to get private mortgage insurance. This is insurance that protects the lender if you default on your loan. This insurance usually costs from 0.15% to 2.5% of the loan amount. Also called mortgage insurance.

Points

Each point is equal to 1% of the loan amount (for example, two points on a $100,000 mortgage would cost $2,000). Points, if charged, are usually collected at settlement with all other closing costs. Negative points reflect the amount that will be credited to you and reduce the amount of closing costs you will pay. Also referred to as discount points.

Prepaid Expenses

The expenses that are usually paid in advance, such as escrows for taxes and insurance, which are paid at closing.

Prepaid Interest

The interim interest that's collected at closing of a first mortgage, covering the period from the date of disbursement to the first of the next month.

Prepayment Penalty

A penalty assessed by some lenders if a loan is paid off early. This is a lump-sum amount due and payable in addition to the loan balance, and is usually limited to the early years of a mortgage. Not all loans have prepayment penalties.

Preparation Charges

The charges you pay the dealer for preparing your new car for delivery. These costs may include fueling and servicing the car as well as any cosmetic changes the dealer makes before the sale.

Prequalification

The process of providing financial and other information (such as employment history and proposed collateral) by a prospective borrower in conjunction with determining how much loan the borrower can obtain for the purchase of a home.

Previous Balance

The amount you owed at the end of the previous payment period. If your credit card company calculates your finance charge using the previous balance method, you pay interest on that amount. Any payments, credits or new purchases made during the current payment period are not counted.

Primary Applicant

The applicant whose name appears first on the application.

Primary Residence

This is the home in which a borrower resides most of the time.

Prime Rate

The prime rate is the rate of interest publicly announced from time to time by the Bank as its "prime rate." The prime rate is set by the Bank based on various factors, including the bank's costs and desired return, general economic conditions, and other factors, and is used as a reference point for pricing some loans. The Bank may price loans to its customers at, above, or below prime rate.

Principal

The amount of money borrowed on a loan.

Processing fee

A fee charged to cover the administrative costs of processing your loan request.

Property Tax

A fixed percentage based on the appraised value of your home that you pay to the county in which the home is located. The specific percent varies dramatically from county to county in every part of the country. You pay this tax annually, semi-annually or as part of your monthly mortgage payments. Depending on when you actually close your loan, some of this property tax may be due at the time of closing. The local county assessor's office can give you the rate for your county.

Private Party

Buying a used vehicle from a private party. Private party transactions are sales from one individual to another.

Rate

The rate of interest on a loan, expressed as a percentage of 100.

Rate Cap

A limit on how much the interest rate can change, either per adjustment period or over the term of the loan.

Rate Information

The rate may include a .25% discount for selecting auto debit from your Bank account and an additional .25% for having a qualifying multiple relationship account.* Rate requires minimum loan-to-value ratio of 80% or less on owner-occupied collateral. Please see assumptions for further terms and conditions and additional rate information.

*Qualifying relationship accounts include: Multiple combinations of checking, savings, money market savings and certificates of deposits. For businesses additional services include cash management services.

Refinancing

Paying off one loan with the proceeds from another loan, generally using the same property as collateral.

Relocation

The process of moving one's residence from one location to another, often having to do with a change of employment.

Repayment Period

In a line of credit, the period when no advances of principal are available and during which the line must be fully repaid, according to the payment terms.

Rescission

The cancellation of a contract. In certain real estate-secured transactions that involve the refinance of a primary residence, applicants have three business days to cancel the transaction.

Real Estate Settlement Procedures Act (RESPA)

The federal law that defines the rules for proper disclosure of fees and information related to residential real estate transactions.

Revolving Line of Credit (RLOC)

A line of credit that allows up to the credit limit amount to be re-borrowed in repeated transactions once it's been repaid.

Refinance

Paying off your existing loan with the proceeds from a new loan in order to take advantage of lower monthly payments, lower interest rates, or save on financing costs.

Savings Rate

The rate of return you receive on your investments, stated as a yearly percentage rate. Also called the rate of return.

Secondary Market

The market in which lenders and investors buy and sell existing mortgages or mortgage-backed securities, which in turn provides greater availability of funds to lenders for additional mortgage lending.

Second Mortgage

The traditional term for a home loan that's a subordinate lien and not a first mortgage, such as a home equity loan or line of credit.

Secured Loans

Loans for which you've given the lender a lien on property such as an auto, boat or other personal property or real estate that will serve as collateral for the loan.

Secure Socket Layer (SSL)

A protocol designed to increase security on the Internet. It allows encrypted files to be transferred from one computer to another.

Security Interest

The legal right an owner gives to a lender to use the owner's property as collateral for repayment of a debt to either the owner or another borrower.

Settlement

The completion of a property's sale or purchase, or the completion of all steps necessary to receive the proceeds of and create an obligation to repay a loan. Also called a closing.

Settlement Costs

Fees paid at, or prior to, the closing of your loan. They may include attorneys' fees, as well as fees for preparing and filing a mortgage, and for taxes, title search, and insurance. They're all the expenses incurred in obtaining the loan and in transferring the ownership of property from the seller to the buyer. Generally, settlement costs range from 2% to 5% of the mortgage amount. Also called closing costs.

Single-Family Residence (SFR)

A detached individual housing unit. The property shares no common ground with neighboring properties and shares no wall or roof, but can be part of a planned unit development (PUD).

Tax Rate

The percentage of your income that you owe in income taxes.

Tax Savings

The amount you may save in taxes by itemizing deductions on income tax returns. Mortgage interest and property taxes are two expenses that you may realize tax savings on, since you may be able to deduct these expenses from your income. Always check with your tax advisor for advice on tax deductibility.

Term

The number of years it will take to pay off a loan. The loan term is used to determine the payment amount, repayment schedule and total interest paid over the life of the loan. For example, at the following terms a loan of $200,000 with a 7.500% APR would have the following payments and total interest paid:

• 15-year mortgage: 180 monthly payments of $1,854 each and total interest paid of $133,724.
• Example assumes an 80% loan-to-value ratio, based on an APR of 7.500% and no points. Amounts may be rounded up. Closing costs apply. If the down payment is less than 20%, mortgage insurance may be needed, which could increase the monthly payment and APR. For adjustable rate loans, rates are subject to increase after the initial fixed-rate period. Loans are subject to credit approval. Flood and/or property insurance may be required. Rates and terms are subject to change without notice and may vary depending upon your credit history.

Third-party fees

Fees charged for services rendered by parties other than the borrower or the lender. Such fees may include appraisal, credit report, title and flood certifications.

Title

Written evidence of ownership in property.

Title Insurance

Insurance that protects an interested party, either the owner or the lender, against defects that would affect legal ownership of the property.

Title Search

An examination of records used to determine the legal ownership of property and all liens and encumbrances on it. Usually performed by a title company or attorney.

Total Cash Required to Close

The total of all closing costs, points, prepaid expenses, down payment and any other fees or adjustments due at closing.

Total Housing Expense

The total of all of your combined expenses due to the ownership of property, including: principal, interest, property taxes, homeowners' insurance, mortgage insurance, homeowners' association dues and any special assessments.

Townhome

A type of residence that shares common walls with other dwellings.

Transaction Fee

The fee that may be charged each time you draw on your credit line.

Truth-in-Lending Act

A federal law requiring disclosure of credit terms using a standard format. This is intended to facilitate comparisons between the lending terms of different financial institutions.

Types of Loans

Major types of loans include:

• Mortgage loans. Loans you take out to pay for your home.
• Home equity loans and lines of credit. Loans you take out using the equity in your home as collateral.
• Consolidation loans and refinancing. Loans you take out to repay other loans.
• Personal Loans. Secured by vehicle, or other personal property.

Underwriting

The lender's process of deciding whether to make a loan to a potential borrower based on credit, employment, assets and other factors, and the matching of this risk to an appropriate rate, term and loan amount.

Unsecured Lines of Credit

Revolving line of credit that is not secured, typically accessed with a check or credit card.

Upfront costs

The costs you must pay when applying for a loan. Typically these include loan application fees. Some lenders require some of your closing costs also be paid when you apply.

VA

An acronym for the Veterans Affairs, a branch of the federal government that provides home loan guarantees for qualified veterans of U.S. military forces.

Variable Rate

An interest rate that may fluctuate or change periodically, often in relation to an index, such as the prime rate or other criteria. Payments may increase or decrease accordingly.

3DES

A highly secure encryption system that encrypts data 3 times, using 3 64-bit keys, for an overall encryption key length of 192 bits. Also called triple DES.

Acquirer

The financial institution that establishes and maintains the merchant account, receives transactions from the merchant, and initiates the interchange via VISA/MasterCard. The acquirer must be a licensed member of MasterCard or VISA. Also called the acquiring bank.

Address Verification Service (AVS)

A service that verifies the cardholder's address, used primarily by mail/phone order merchants. AVS does not guarantee that a transaction is valid.

Batch

A group of accumulated transactions that have been captured, but not yet settled. Most merchants settle their batches at the end of each day.

Card Associations

Payment networks such as VISA® or MasterCard® (and others) that act as a gateways between acquirers and issuers for authorizing and funding transactions

Cardholder

The owner of the credit or debit card that is being used to make a purchase

Chargeback

A transaction that has been disputed by the cardholder or issuer, is sent back through interchange to the acquirer, and must be resolved by either the acquirer or the merchant.

Check Conversion

A check protection service by which a merchant scans a check image and converts it into an electronic transaction, similar to a PIN-based debit, for which the merchant is paid immediately. Check conversion requires a check imager peripheral.

Check Guarantee

A check protection service by which a merchant guarantees he or she will receive payment for a check, even in the event of insufficient funds. Check guarantee requires a check reader peripheral.

Clearing

The exchange of transaction details between an acquirer and an issuer which posts the transaction to the cardholder's account and reconciles it for settlement.

CVC2

See CVV2. Card verification code 2 (CVC2) is MasterCard's term for this security code.

CVV2

Card verification value 2. CVV2—a 3 digit code printed on the back of a Visa card—is an important security feature that protects Internet and phone transactions from fraud. CVV2 ensures that the credit card number is legitimate and that the card is in the possession of the purchaser.

Discount Rate

The amount charged to a merchant by the acquirer for processing the merchant's daily credit card transactions.

DUKPT

Derived Unique Key Per Transaction. An encryption technique for secure key-management that uses a unique key for each separate transaction to prevent the disclosure of any previously used key.

Electronic Benefits Transfer (EBT)

A government-funded cash assistance program that distributes payments such as Food Stamps and Temporary Assistance for Needy Families (TANF) on cards that can be swiped and used with POS terminals.

Imprinter

A manual device used to imprint embossed card information onto sales drafts for transaction records. An imprinter only captures card information; it cannot authorize a transaction. Imprinters are primarily used as a backup when the other processing equipment is unable to read data on the card's magnetic stripe. For merchants without an electronic printer, an imprint is needed to prove a card was present if a customer disputes a key-entered transaction.

Interchange

The process of authorization and settlement of card transactions through VISA or MasterCard. Interchange includes the transmittal of cardholder information, transaction data, and fees.

Interchange Fee

The amount card associations charge acquirers for each card transaction they process. The card associations pay the interchange fee to the issuer as compensation for expenses incurred in providing lines of credit to cardholders. The acquirer's cost is passed on to merchants as a part of the discount rate.

Issuer

The financial institution that issues a credit card to a cardholder. The issuer must be a licensed member of MasterCard or VISA. Also called the issuing bank.

Level I Processing

Purchases made with personal credit cards issued from U.S. banks qualify as Level I transactions. This means that the only information the merchant must pass to process the transaction is the merchant's name, transaction amount, and the date.

Level II Processing

Level II transactions normally involve corporate cards issued from a U.S. bank. Transactions that qualify for Level II processing cost the merchant less than Level 1 transactions. To qualify for Level II, a transaction must be passed with: merchant name, transaction amount, date, tax amount, customer code, merchant postal code, tax identification, merchant minority code, and merchant state code.

Level III Processing

Of the 3 different levels of credit card processing, Level III provides the lowest transaction processing rate. But, in order to qualify for the lowest rate, Level III transactions must be passed through the processing system with much more detailed transaction information that Level I or II transactions. Because so much information must be transmitted, not all terminals are equipped to process Level III transactions. Purchases that qualify as Level III transactions generally are made with government credit card or corporate cards.

Merchant

A business that has contracted with an acquirer for card processing services and accepts credit cards as a method of payment for goods or services.

Merchant Account

The contract between a merchant and an acquiring bank for providing card processing services.

Message Authentication Code (MAC)

A data security feature that produces a unique code for every digital message that allows the recipient to verify that data has not been altered since being transmitted by the sender.

Online Payment Gateway

See virtual terminal.

Point-of-sale (POS) Terminal

A device used to record and transmit card transactions electronically for authorization and processing. POS terminals can transmit information via a regular telephone line, broadband Internet connection, or wireless signal. Also called a card processing terminal.

Secure Socket Layer (SSL)

A security feature that keeps Internet communications private and ensures they have not been forged or tampered with.

Settlement

The exchanging of data or funds between the acquirer and the issuer. Settlement includes funding the merchant for the transaction and paying any necessary fees due to the issuer or acquirer for processing the transaction.

Shopping Cart

A software application needed for ecommerce and online transaction processing. Shopping cart software collects the items a cardholder selects for purchase, maintains a running total, and may calculate taxes and shipping.

Virtual Terminal

An Internet-based portal used for processing card transactions. Brick-and-mortar merchants may use an online payment gateway to process card transactions online without a POS terminal or card processing software. Online merchants must have an online payment gateway to enable their business for ecommerce. Also called an online payment gateway.