This glossary is provided to help you with general terminology of some basic financial terms.

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Amortization
A schedule of remaining payments for a loan, showing the amount going to principal and the amount going to interest.

Annual Percentage Rate (APR)
The annual percentage rate is a method devised by the government to compare the costs of financing a loan. The APR may be higher than the rates stated in your loan documents because it includes the costs paid in addition to the loan amount. These costs may include interest paid, loan fees, appraisal, and closing fees.

Annual Percentage Yield (APY)
The annual percentage yield is a method devised by the government to compare the yields of various deposit accounts.

Asset
Anything owned by a person that has an exchange value.

ATM
Automatic Teller Machine

Balance
1. The amount of money in an account after a sum has been deposited or withdrawn.
2. The difference in how much you owe and how much you have paid on a debt.

Cash Flow
The difference between what you earn and your expenses.

Certificate
(also Certificate of Deposit): A savings account that typically pays higher interest for funds to remain on deposit a specified term. Early withdrawals may be subject to penalty and additional deposits are typically not allowed except at maturity.

Check
A negotiable item drawn against your checking account

Closing Costs
All costs paid by borrowers and/or sellers that affect the closing of a mortgage loan. These normally include an origination fee, discount points, title insurance, escrow fees, loan document fees, appraisal and credit report fees, mortgage insurance, and prepaid items such as taxes and insurance impounds.

Collateral
Anything of value that you promise to give the lender if you can't pay back a loan.

Compounding
Adding interest to the principal. The new total is then used as the basis for future computations of interest.

Creditor
A person or business that you owe money.

Deposit
To put money into an account.

Depositor
Person depositing money into the account.

Direct Deposit
Automatic deposit on a regular basis of a government check or employee's payroll check directly into a specified account.

Direct Payment
Authorizes a company to electronically collect a maximum amount from a checking or savings account on a regular basis.

Down Payment
The cash difference between the sale price and the loan amount.

Earnings
Income, wages or compensation.

Endorse
To sign one's name as a payee on the back of a check.

Equity
The difference between the fair market value of one's home and the outstanding mortgage balance.

Escrow
A neutral third party who prepares the necessary documents used when selling real estate. They see that the agreed upon terms of the transaction are carried out. This third party is paid by both the buyer and seller.

Fixed Rate
An interest rate which remains the same for an agreed amount of time.

Good Faith Estimate
All lenders are required to provide a mortgage applicant with an estimate based on its experience of what the closing costs will be.

Home Equity Line of Credit (HELOC)
A form of revolving credit in which one's home serves as collateral.

Impounds
That portion of a mortgagor's monthly payment held by the lender to pay for taxes, fire insurance, flood or earthquake insurance, and mortgage insurance as they become due and payable. All government loans and conventional loans over 90% LTV require an impound account.

Interest
(1) The cost of borrowing money, or
(2) The amount of money earned within a particular time period on a deposit account. The earnings are based on a percentage of the account's balance.

IRA
Individual Retirement Account. A government-sponsored retirement savings plan, offering tax incentives to individuals.

Liquid Asset
An asset that can easily be converted into cash.

Loan
Money given to a person who agrees to repay it at a certain time.

LTV (Loan to Value)
The ratio of a loan's current balance to the original loan amount.

Money Market Account
A liquid deposit that typically pays higher interest than regular savings accounts in exchange for limited electronic or third-party withdrawal privileges.

Notary Public
One who attests or certifies writings (as a deed) to make them authentic and takes affidavits, depositions, and protests of negotiable paper.

Origination Fee
This fee is charged by the lender to partially offset the costs of origination and processing the loan application.

Overdraft Protection
A contingency plan that transfers funds to checking from some other source when the checking balance is insufficient to cover checks or other items presented for payment.

PIN (Personal Identification Number)
A secret code known only by the account owner that is used for identification and electronic account access, such as through ATMs or telephone banking.

PMI (Private Mortgage Insurance)
Insurance provided by a private company protecting the lender against loss in the form of a percentage of the loan amount which can be financed.

POS (Point-of-Sale)
A purchase made from a merchant using an ATM or check card. Funds are deducted automatically from your checking account to cover the purchase.

Points
Fee charged by the lender on a mortgage loan that is a percentage of the loan amount.

Principal
The amount of a loan that you borrow, not including interest.

Statement
A periodic report of transactions on your account, including deposits, withdrawals, payments and earnings.

Term
The agreed length of time given to pay back a particular loan.

Title Insurance
A contract by which the insurer (usually a title insurance company) agrees to pay a specific amount for any loss caused by defects of the title to real estate.

Transfer
Moving funds from one of your accounts to another account.

Variable Rate
An interest rate that can fluctuate during the term of the account.

Withdrawal
Taking money out of your account.