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Financial Glossary

Acceptance

Formal acknowledgement by the seller of the buyer's offer.

Addendum

Supplement to a contract with a proposed change or explanation.

Adjustable-rate mortgage (ARM)

Home loan where the interest rate adjusts at regular intervals, according to on an index.

Adjusted gross income (AGI)

Total taxable income, minus allowable credits, deductions and exemptions.

Agent

Individual authorized to act on behalf of someone else (often related to insurance).

Aggregate

Combined total of several balances.

Allowances

Amount the builder allots in the contract for a buyer to select alternate items (e.g., carpet).

Alternative mortgage

Any home loan that does not conform to a standard, fixed-rate.

Amenities

Features that enhance property value or appearance (e.g., pool, playground).

Amortization

Repaying debt in periodic payments over a predetermined time.

Amortization schedule

Table detailing how much of a payment applies to principal and interest over the loan's life.

Amortization term

Amount of time required to repay a loan, often noted in months.

Amount financed

Principal loan amount, which is often purchase amount minus prepaid fees and points.

Annual percentage rate (APR)

Yearly cost of borrowing, expressed in a standard percentage format.

Annual percentage yield (APY)

Dividends earned, including compounding, assuming funds remain in that deposit account for one year.

Annuity

Investment to fund future fixed payments at regular intervals.

Application fee

Charge to process a borrower's request.

Appraisal

Estimate of a property's market value.

Appraisal fee

Charge for estimating a property's market value.

Appreciation

Increase in asset or property value.

Arbitration

Dispute resolution through an impartial third party.

Asking price

Amount seller requests for a property.

Assessed value (assessment)

Value of property for tax purposes.

Assets

Item that can be exchanged for cash value.

Audit

Examination of accounts or records for accuracy.

Automated Clearing House (ACH)

National network that facilitates the transfer of electronic debits and credits.

Automatic payment

Regularly scheduled, authorized withdrawals from a checking or savings account.

Automatic transfer

Regularly scheduled, authorized movement of money from one account to another.

Balance sheet

Financial statement showing assets, liabilities and net worth of a business.

Balloon payment

Large payment of the remaining balance, required at the end of certain loans.

Base price

Cost of a vehicle without options.

Basis point

One hundredth of a percent (i.e., 7% is 50 basis points higher than 6.5%).

Beneficiary

Recipient of money or property from a will, trust or insurance policy.

Bill of sale

Legal document transferring property ownership.

Binder

Preliminary agreement until a formal contract or insurance policy is issued.

Bond

Government or business promise to pay a sum of money, plus interest, by a certain date.

Borrow

Obtaining a loan, with a commitment to repay.

Breach of contract

Breaking the terms of a legal agreement.

Brokerage

Firm that receives a fee for bringing together two parties in a transaction.

Building code

Local requirements that must be met for building or remodeling a structure.

Building permit

Local government document outlining the terms of a structure's creation or renovation.

Built-ins

Items (e.g., appliances, cabinets, fans) that remain with a structure when sold.

Buydown

Reducing interest rate or monthly payment by paying money or points on a loan upfront.

Cap

Upper limit that an interest rate cannot exceed.

Capital

Wealth such as money or property, often invested to generate additional wealth.

Carport

Shelter over a vehicle parking area, which is not fully enclosed.

Cashier's check

Negotiable instrument issued by a financial institution from its funds, payable to a third party.

Cash-out refinance

New mortgage is higher than the remaining loan balance, resulting in extra funds from equity.

Claim

Request for payment related to an insured loss.

Clear title

Ownership document that is free of liens and defects.

Closing

Meeting to finalize the sale, sign the mortgage, pay closing costs and transfer the title.

Closing costs

Expenses at the end of a sale (e.g., origination fees, discount points, prepaid taxes/insurance).

Closing statement

Document outlining what each party pays and detailing ownership transfer (HUD-1 statement).

Collateral

Property promised to ensure repayment of a debt.

Common area

Area in a housing development owned by all residents instead of an individual (e.g., park).

Compounding method

Dividends paid on principal savings and previously earned dividends.

Condominium

Individually-owned dwelling unit within a complex, with shared ownership of common areas.

Contingency

Condition that must be met before a contract is binding.

Contract

Legal agreement between parties.

Contribution

Money put into an individual retirement or designated savings account.

Conventional mortgage

Home loan that is not guaranteed or insured by the federal government.

Convertible ARM

Adjustable-rate home loan that can be converted to fixed-rate based on certain conditions.

Co-signer

Someone who accepts joint responsibility for repayment of another person's debt.

Covenants, conditions and restrictions (CC&Rs)

Rules for a housing development, such as landscaping guidelines (often used by an HOA).

Credit

Creation of debt, amount available to borrow or a party's history of timely repayment.

Credit bureau

Company that tracks credit data and history (e.g., Equifax, Experian and Trans Union).

Credit history

Record of debt and repayment.

Credit rating (credit score)

Assessment of ability to manage debt, including factors like income and credit history.

Credit union

A not-for-profit financial cooperative, owned by its members for their mutual benefit.

Debt consolidation

Paying off multiple loans with one new loan, often at a lower rate and/or payment.

Debt-to-income ratio

Percentage of monthly earnings that go to pay expenses.

Deductible amount

Amount a policyholder must pay before an insurance company covers remaining costs.

Deductions

Items subtracted from gross income to reduce the taxable amount.

Deed

Legal document conveying title to a property.

Default

Failure to make timely payments or comply with terms of a loan.

Dependent

Someone who relies on another for financial support, often one-half or more.

Deposit

Putting funds into an account at a financial institution.

Depreciation

Decrease in property value.

Direct deposit

Transferring funds directly into an account, rather than issuing a paper check.

Dividend

Credit union earnings paid to members on their deposit accounts.

Down payment

Portion of the purchase price that is paid upfront by the buyer.

Earnest money

Deposit by a buyer to demonstrate serious intent to purchase a house.

Education IRA (Coverdell Education Savings)

Tax-free savings account intended to fund a child's higher education.

EIN (Employer Identification number)

Identifier assigned by the IRS for business tax purposes (similar to a Social Security number).

Electronic Funds Transfer (EFT)

Ability to move funds from one account or institution to another through non-paper means.

Equal Credit Opportunity Act

Federal law that protects borrowers from lender discrimination.

Equity (home equity)

Market value of a property, minus existing liens (e.g., mortgage balance).

Escrow

Holding of documents and funds by a third party; or, payments set aside for taxes and insurance.

Estate

Sum of a person's assets (e.g., property, possessions) and liabilities (e.g., unpaid debt).

Exemption

Deduction permitted to reduce taxable income, based on status.

Extended warranty (service contract)

Agreement that prolongs standard manufacturer, retailer or administrator coverage.

Fair Credit Reporting Act

Federal law that protects consumers, regulates credit bureaus and ensures accuracy in reporting.

Fair Housing Act

Federal law that prohibits discrimination in housing and real estate transactions.

Fair market value

Price, assuming sufficient time and knowledge exist between a rational buyer and seller.

Fannie Mae

Chartered company that provides funds to lenders for low-rate mortgages.

Federal Housing Administration (FHA)

Federal agency that insures home loans, often with reduced down payments.

Federal Reserve Board

Group that guides the financial system through monetary policy and credit regulations.

Federal Trade Commission (FTC)

Federal agency that enforces antitrust and consumer protection (e.g., identity theft) laws.

First lien (first mortgage)

Initial home loan that has priority right to a property, in case of default.

Fixed-rate mortgage

Home loan where the interest rate does not change over the entire term.

Forbearance

Lender delays foreclosure to allow the borrower time to make delinquent payments.

Foreclosure

Lender takes ownership and liquidates property to offset loan balance.

Form 1099-DIV

Annual statement of taxable capital gains and dividends.

Form W-2

Wage and Tax Statement that summarizes annual taxable income and withholding.

Gap insurance

Coverage to protect a vehicle owner from financial loss, in the event it is totaled or stolen.

Good faith estimate (GFE)

Statement of expected closing costs that a lender must issue within three business days of receiving a home loan application.

Grace period

Time when a certain rule (e.g., finance charge, penalty, interest rate) does not apply.

Gross income

Total income before taxes or deductions.

Hard inquiry

Requests noted on a credit report that appear after a person applies for a loan or credit.

Hazard insurance

Coverage for physical property damage due to certain losses (e.g., fire, storms, vandalism).

Home equity line of credit (HELOC)

Open-ended, revolving debt taken out in second lien position against the property's accrued equity.

Home equity loan

Closed-ended debt taken out in second lien position against the property's accrued equity.

Home inspection

Professional examination of a home's visible structure and systems, often prior to purchase.

Homeowners association (HOA)

Group who enforces CC&Rs and maintains common areas within a housing development.

Homeowners insurance

Coverage for damage to the house and personal property as well as against injury lawsuits.

Homeowners warranty

Guarantee of certain home features, systems and some appliances, for a specific term.

Income

Earnings received from a job and/or investment.

Income Tax

Payment to federal, state and local governments based on earnings.

Index

Economic indicator used to calculate variable yields and interest rates.

Individual Retirement Account (IRA)

Investment that enables a person to accumulate tax-deferred or tax-free earnings.

Insufficient funds (NSF or bounced check)

Transaction is presented against an account, but not enough funds are available to cover it.

Interest rate

Percentage paid for the use of borrowed funds.

Interest-only loan

Debt where the principal payment is deferred and only interest is paid for a specific term.

Invoice price

Initial charge from the manufacturer to the dealer, with freight and delivery fees.

Joint account

Account shared by multiple people, with equal rights and liabilities.

Jumbo mortgage

Any home loan that is higher than the standard limit set by Fannie Mae.

Kelley Blue Book value

Well-known source for current vehicle market values.

Keogh Plan

Investment that enables a self-employed person to set aside funds for retirement

Late charge

Fee assessed to a borrower for a delinquent payment.

Lease

Legal agreement to use or occupy an owner's property during a specific term for a certain fee.

Liability insurance

Coverage to protect a vehicle owner from financial loss, if s/he causes injury or damage to others in an accident.

LIBOR Rate (London Interbank Offered Rate)

Interest rate that financial institutions use when lending to one another.

Lien

Lender holds the legal claim against a property until the borrower pays the debt.

Line of credit

Open-ended, revolving debt.

Liquidity

Ability to quickly and easily convert assets to cash.

Loan origination fee

Charge paid to the lender for processing a loan.

Loan term

Time allotted for the borrower to repay a debt.

Loan-to-value ratio (LTV)

Mortgage amount as a percentage of the total property value.

Lock (rate lock)

Lender guarantees an interest rate on a loan for a certain period of time before closing.

Manufactured housing home (prefab home)

Housing that is built mainly in a factory and later assembled on site.

Margin

Percentage the lender adds to an index to determine an adjusted interest rate.

Maturity

Date when the principal balance of a loan or investment is due to be paid.

Medicare

Federal program that covers certain health care expenses for people 65 and older.

MLS (Multiple listing service)

Online database of listed homes for sale in a specific area.

Money market

Higher yield savings account.

Monroney sticker (sticker price)

Window label required by law on new vehicles, which lists MSRP and option prices.

Mortgage

Loan to purchase or refinance a home.

Mortgage broker

Paid party who brings borrowers and lenders together.

MSRP (manufacturer's suggested retail price)

Maker's recommended retail sales price for a vehicle

National Automobile Dealers Association (NADA)

Organization that provides vehicle appraisal guides for consumers and auto dealers.

National Credit Union Association (NCUA)

Independent federal agency that charters and supervises federal credit unions.

National Credit Union Share Insurance Fund (NCUSIF)

Fund to protect member deposits up to $100,000 in federal and federally-insured credit unions.

Negative amortization

Increase in remaining loan balance because monthly payments do not cover interest due.

Net income

Total income after taxes and deductions.

Net worth

Total assets minus total liabilities.

Options

Extra features on a vehicle (e.g., GPS, anti-theft system, upgrades).

Overdraft protection

Service that draws from savings or a line of credit to cover items that exceed the available checking account balance.

Periodic rate

Interest rate for a segment of time, such as APR divided by the number of billing periods.

Personal Identification Number (PIN)

Numeric password used to access a system or account.

PITI

Principal, interest, taxes and insurance are the elements of a monthly mortgage payment.

Point (discount point)

Amount paid upfront to a lender to decrease the interest rate; one percent of a home loan.

Policy (insurance)

Contract outlining insurance coverage and premiums.

Power of attorney

Signed document giving someone legal right to conduct business on the signer's behalf.

Preapproval letter (mortgage)

Document from a lender indicating how much a homebuyer may be able to borrow.

Premium

Amount paid by a policyholder for insurance.

Prepayment penalty

Fee charged to the borrower for paying off a loan before the scheduled due date.

Pre-qualification

Evaluation to determine how much a potential borrower may qualify to borrow.

Prime rate

Interest charged by lenders to most creditworthy borrowers.

Principal

Original loan amount borrowed or the remaining balance of that loan, before interest.

Private mortgage insurance (PMI)

Coverage for the lender, in the event that the borrower defaults on a loan.

Promissory note

Written contract from a borrower to a lender, promising to pay back a loan by a certain date.

Property tax

Tax on property value issued by the county assessor.

Purchase agreement

Contract outlining the terms of a sale.

Realtor

Real-estate agent who is a member of the National Association of Realtors.

Recording fee

Charge by local government for recording a real-estate transaction.

Refinance

Paying off an existing loan with the funds from a new loan.

Regulation Z

Codes to enforce the Truth-in-Lending Act, requiring that lenders state all costs of borrowing.

Renter's insurance

Coverage for liability and possessions within a rented dwelling.

Repossession

Reclaiming property used as collateral on a loan for failure of payment.

Resale value

Fair market price for an existing property.

Reverse mortgage

Loan to homeowners, usually older or retired, that borrows from their existing home equity.

Right of rescission

Right to void a contract without penalty within three days (cooling-off period).

Rollover

Tax-free movement of funds from one qualified plan to another within a specified time.

Roth IRA

Investment where contributions may be taxed, but earnings and distributions may be tax-free.

Savings certificate (CD)

Investing an amount for a specific time and rate; early withdrawal penalties may apply.

Second mortgage

Home loan that has secondary right to a property, after the first mortgage.

Secured loan

Loan where borrower must provide collateral.

Simple interest

Dividends paid on principal savings without compounding.

Statement

Periodic report of account activity or record of funds owed.

Step-up certificate (step-rate certificate)

Savings certificate with a one-time option to upgrade to a higher rate.

Subprime mortgage

High-rate home loans for borrowers with lower credit scores and higher associated risk. Desert Schools does not offer "subprime" products.

Term

Amount of time for a loan or deposit to mature.

Title

Legal document giving proof of ownership.

Title insurance

Coverage against loss arising from legal disputes over property ownership.

Title search

Checking to ensure that the seller is the legal property owner and no outstanding liens exist.

Trade-in value

Amount a dealership credits a buyer for a vehicle used as down payment on another vehicle.

Traditional IRA

Investment where contributions may be tax deductible, but distributions are generally taxable.

Treasury bill or Treasury note

Government obligation; bills are for one year or less and notes are for one year or more.

Trust

Assets set aside in a fund for a beneficiary.

Trustee

Invests and manages the trust account until the beneficiary is eligible to take control.

Truth in Lending Act

Federal law that requires lenders to fully disclose, in writing, loan terms and conditions.

Underwriting

Evaluation of a loan application to determine the risk to the lender.

Unsecured loan

Loan where borrower is not required to provide collateral.

Upfront costs

Expenses that must be paid before closing a loan (e.g., down payment, closing costs).

Upside-down

Fair market value of a vehicle or property becomes less than the principal loan balance.

Underwriting

Evaluation of a loan application to determine the risk to the lender.

Unsecured loan

Loan where borrower is not required to provide collateral.

Upfront costs

Expenses that must be paid before closing a loan (e.g., down payment, closing costs).

Upside-down

Fair market value of a vehicle or property becomes less than the principal loan balance.

Waiver

Authorized, voluntary release of rights or claims.

Warranty

Written guarantee of merchandise quality, clear title or the truth of a contract statement.

Withdrawal

Taking funds out of an account at a financial institution.

Withholding

Amount deducted from income prior to an individual receiving funds.

Zero-lot line

Positioning a house near or on the lot boundary, resulting in a shared wall between houses.

Zoning

Regulations controlling land use within a jurisdiction.

 


Mission Statement
The mission of United Bay Community Credit Union is to be our members' primary financial
institution, providing them with quality, confidential, professional and personal service, while
maintaining a sound and stable credit union.

 
      
     

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