Glossary

401(k) - A 401(k) plan is a type of tax-qualified deferred compensation plan in which an employee can elect to have the employer contribute a portion of his or her cash wages to the plan on a pretax basis

403(b) - A 403(b) tax sheltered annuity (TSA) plan is a retirement plan offered by public schools and certain 501(c)(3) tax exempt organizations. It can enhance and protect your retirement security

457(b) - Like 403(b) plans, 457(b) plans operate with an employer plan that defines how the plan operates and the products and vendors that are available. Unlike a 403(b) plan, the 457(b) plan must be held in a trust for the exclusive benefit of the plan's participants and beneficiaries or offer qualified annuities for the benefit of the participant

- A -

Accrued Interest - Interest that has been earned, but not yet paid.

Adjustable Rate - An interest rate that changes periodically in relation to an index. Payments may increase or decrease accordingly.

Annual fee - The amount a cardholders pays to a credit card company for the right to hold a particular credit card.

Amortization - The gradual elimination of a liability, such as a mortgage, in regular payments over a specified period of time.

Annual Percentage Rate (APR) - The cost of credit for personal loans, including mortgages, expresses as a percentage per year.

Annuity - A contract that pays out for a stated period or life. This plan is designed to liquidate funds.

Appreciation - An increase in the value of a property due to changes in market conditions or other causes.

Asset - Things you own, including real estate, investments, and personal property. Anything of worth that is owned.

- B -

Bankruptcy - State of being unable to pay debts.

Bear Market - An extended period of general price decline in the stock market as a whole.

Before Tax Income - Income before taxes are deducted.

Beneficiary - The person designated to receive the income from a trust, estate, or deed of trust.

Blue Chip Stock - A common stock which is issued by larger, well-established corporations.

Bond - Bonds are debt and are issued for a period of more than one year. When an investor buys bonds, he or she is lending money.

Budget - A financial plan for saving and spending money.

Bull Market - An extended period of generally rising prices in the market as a whole.

- C -

Capital Gain - Profit from the sale of investment or asset.

Certificate of Deposit (CD) - A deposit made, usually to a bank or credit union, for a specified amount of time for a specified interest rate.

Collateral - An asset that can be repossessed if a borrower defaults. Assets pledged as security for a loan.
 
Combined loan-to-value (CLTV) - The unpaid principle balances of all the mortgages on a property (first and second usually) divided by the property value.

Conforming Loan - Generally, a mortgage loan under $417,000.

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

Credit - Money loaned. A contractual agreement in which a borrower receives something of value now and agrees to repay the lender at some later date.

Creditor - Lender of money.

Credit Report - A report of an individual's credit history prepared by a credit bureau and used by a lender in determining the borrower’s creditworthiness.

Currency - Money.

- D -

Debt - Money borrowed.

Debt consolidation - The replacement of multiple loans with a single loan.

Debt elimination - Plan of action to pay-off all debt.

Default - Failure to make timely payment of interest or principle on a debt.

Depreciation - A decline in the value of property.

Dow Jones Industrial Average - A composite average of 30 industrial stocks chosen by Dow Jones as representative of stock market activity.

- E -

Equity - The amount of ownership that has been built up by the holder of the mortgage through payments and appreciation.

Escrow - A trust account held in the borrower's name to pay obligations such as property taxes and insurance premiums.

- F -

Fair Credit Reporting Act - A consumer protection law that regulates the disclosure of consumer credit reports by consumer/ credit reporting agencies. It also establishes procedures for correcting mistakes on one's credit record.

Financial Planner - A person who analyzes an individual's personal finances to help them establish a personal financial strategy.

Fixed Rate - An interest rate which is fixed for the term of the loan. Payments as well are fixed at one amount.

FHA Loan - More appropriately termed "FHA Insured Loan." A loan for which the Federal Housing Administration insures the losses the lender may incur due to your default.

Foreclosure - The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgage. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to debt.

- G -

Grace Period - A period of time during which a loan payment may be paid after it is due date but not incur a late penalty.

Gross Income - The income before taxes or expenses are deducted.

- I -

Inflation - A general increase in the price level of goods and services.

Interest - The cost for the use of borrowed money.

Interest Rate - The periodic change, expressed as a percentage, for use of credit.

- J -

Jumbo Loan - Mortgage loans over $417,000.

- L -

Liabilities - Money owed.

Loan to Value Ratio (LTV) - A ratio determined by dividing the sale price or appraised value into the loan amount.

- M -

Mortgage- A mortgage is a legal contract that describes the term of the loan obtained to buy a piece of property.

- N -

Net Income - The income of you have after you've paid taxes and any and all other liabilities.

Net Worth - The amount of wealth calculated by taking the total value of assets owned and subtracting all liabilities.
 
- P -

PITI - Principle, Interest, Taxes and Insurance, which comprise your monthly mortgage payment.

Points - The amount paid either to maintain or lower the interest rate charged. Each point is equal to one percent (1%) of the amount of loan.

Principle - Amount of debt, not including interest. The face value of the loan.

Property Taxes - Taxes assessed on real estate.

- S -

Seller Carry Back - An agreement in which the owner of a property provides financing.

Stock - Shares of ownership in a company.

- T -

Title - The written evidence that proves the right of ownership of a specific piece of property.

Total Debt Ratio - Monthly debt and housing payments divided by gross monthly income.

Truth-in-Lending Act - A federal law requiring a disclosure of credit terms using a standard format.

- U -

Underwriting - The process of verifying data and approving a loan.

- V -

Variable Rate - An interest rate that changes periodically in relation to an index.