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A

Abstract (of title)
A written summary of the title history of a particular piece of real estate.

Acceleration Clause
A provision of a mortgage or note, which provides that the entire outstanding balance will become due and payable in the event of default.

ARM (Adjustable Rate Mortgage)
A mortgage in which the interest rate is adjusted periodically, based on the movement of a financial index.

Amortization
Repayment of loan by installment payments. As the payments are made, the debt is reduced so that at the end of fixed period or term, no money will be owed.

APR (Annual Percentage Rate)
The annual percentage rate refers to the total cost of the loan, expressed as a yearly rate.

Application Fee
That part of the closing costs pre-paid to the lender at time of application to cover initial expenses.

Appraisal
A report made by a qualified person as to the value of a property as of a given date.

Assessed Value
The value placed on a piece of real estate by the taxing authority for the purpose of taxation. Also called an assessment.

Assets
What a person owns. Assets include cash and cash equivalents, invested assets and use assets.

Assumption of Mortgage
The purchaser takes over mortgage payments for the balance of the loan, assuming primary liability. Unless specifically released by the lender, the seller remains secondarily liable.

Automated Clearing House (ACH)
Computer based clearing and settlement facility for interchange of electronic debits and credits among financial institutions. ACH entries can be substituted for checks in recurring payments such as mortgages or in Direct Deposit distribution of various benefits.

Automated Teller Machine (ATM)
A convenient, unattended computer terminal where you use a plastic card and personal identification number (PIN) to withdraw, deposit or transfer money from your account. (The ATM card is also known as a Debit Card).

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B

Bad Check
A check that is written when there is not enough money in the account. Also known as a bounced check.

Balance
The amount of money you have in your account.

Balance a checkbook
See Reconcile.

Balloon Mortgage
A mortgage with periodic payments that do not fully amortize the loan. The outstanding balance of the mortgage is due in a lump sum at the end of the term.

Beneficiary
Insurance: The person or entity who has a remainder interest in policy proceeds. Trusts: The person whom the trust is to benefit and who has beneficial ownership of trust assets.

Bounced check
A check that comes back to your bank for collection because you did not have enough money in your account.

Bridge Loan
A short-term loan secured by the equity in an as-yet-unsold house, with the funds to be used for a down payment and/or closing costs on a new house. There is no payment of principal until the house is sold or the end of the loan term, whichever comes first. Interest payments may or may not be deferred until the house is sold.

Broker
The person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them.

Buydown
Money advanced by an individual (e.g. builder, seller, buyer, lender, developer) to lower monthly mortgage payments for a few years or the whole term.

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C

Cancelled check
A check voided by endorsement, indicating it has been paid by the drawee bank and cannot be renegotiated.

Cash
Money in the form of bills or coins.

Cashier's check
A bank issued check, also called official check signed by a bank officer and drawn against funds of the bank itself. A cashier's check is generally regarded as good as cash.

Cap (interest rate)
The maximum interest rate increase allowable on an adjustable rate mortgage. Does not result in negative amortization. See Negative amortization.

Cap (payment rate)
The maximum payment amount increase allowable on an adjustable rate mortgage. May result in negative amortization. See Negative amortization.

Certificate Of Title
A statement that shows ownership of property, stating that the seller has clear legal title.

Check
A written order to the bank that tells it to take a stated amount of money from your checking account and pay it to another person or company.

Check Register
Form to keep track of your checking account transactions.

Checking Account
A payment method to manage your money efficiently.

Cleared Check
A check that has gone through the financial institution's processing center and is listed on your periodic statement.

Closing
The concluding day of the real estate transaction, when title and deed pass from seller to buyer, the buyer signs the mortgage and pays the purchase price and closing costs.

Closing Costs
Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Also called "settlement costs."

Closing Statement
A financial disclosure giving an account of all funds received and expected at closing, including the escrow deposit for taxes, hazard insurance and mortgage insurance for the escrow account.

Commission
An agent's or broker's fee for bringing the principals together and helping to negotiate a real estate transaction, often a percentage of the sales price or flat fee.

Commitment
An agreement, frequently in writing, between a lender and a borrower to loan money at a future date, subject to certain conditions.

Comparables
Refers to similar properties used for comparison purposes in the appraisal process. These properties will be reasonably the same size and location, with similar amenities and characteristics, so that the approximate fair market value of the subject property can be determined.

Compound Rate
The percentage of interest earned, expressed either as an annual rate or a rate per compounding period.

Compounding Period
The period of time that passes before interest is compounded once. For example, if the compounding period is one year, interest is being compounded once a year. If the compounding period is a month, interest is being compounded each month.

Condominium
Ownership of a single unit in a multiunit building or complex of buildings. Along with this goes a share of ownership of the common areas.

Conservator
A fiduciary appointed by a court to manage the financial affairs of an incompetent person.

Contingency
A condition that must be met for a contract or a commitment to remain binding.

Contingent Beneficiary (IRA)
A person who stands next in line to receive an asset if the original beneficiary predeceases the owner or disclaims the asset.

Contract
A mutual agreement between two or more competent parties concerning a specified subject.

Conventional Mortgage
Any mortgage loan that is not insured by FHA, guaranteed by VA, of funded by a government authorized bond sale or grant.

Convey
To transfer real estate from one person to another.

Corporation
An entity of indeterminate life owned by one or more parties. Ownership is evidenced by shares of stock, each representing a fractional interest in the entity.

Credit
A sum of money deposited into an account. Also, the ability to charge merchandise or borrow money.

Credit Report
The report to a prospective lender on the credit standing of a prospective borrower.

Custodianship
A completed gift to a custodian for the benefit of a minor under either UGMA or UTMA or WUTMA.

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D

Debt
Money borrowed by an individual or entity resulting in an obligation to repay the amount borrowed plus interest according to a set schedule.

Decedent
A person who has died.

Deed
A legal written document by which title to property is transferred.

Default
Failure to fulfill the terms as agreed to in the mortgage of note.

Deposit
The money you put into your account. Or (verb) to put money into your account.

Deposit Ticket
The form you use to put money into your account.

Direct Rollover
A tax-free transfer of cash or other property between two qualified plans or IRAs, where the transferred cash or property never passes through the hands of the owner.

Direct Transfer
Pertains to pension plans and IRAs. A direct transfer moves pension benefits from one institution to another. The individual never has possession of the benefit dollars. This differs from a rollover, in which the individual may have possession of the funds for as long as 60 days before reinvesting funds in a second plan without tax consequences.

Distribution
Any outflow from a retirement plan.

Down Payment
The difference between the sale price of a property and the mortgage amount.

Due-On-Sale
A clause in a mortgage, which gives the lender the right to require immediate repayment of a mortgage balance if the property changes hands.

Durable Power of Attorney (DPOA)
A document executed by a person called the principal, authorizing a person called the attorney in fact or agent, to perform certain acts on behalf of the principal relating to property and financial matters.

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E

Early (or Premature) Distribution/Withdrawal
A distribution from a qualified plan, an IRA, or 401(k), Keogh, or similar plan that takes place before the recipient has reached age 59½ and is not associated with a rollover.

Earnest Money
The deposit money given to seller or his agent by the potential buyer at the time of the purchase offer. If the offer is accepted, the money will become part of the down payment.

Easement
A right to the limited use of land owned by another. An electric company, for example, could have an easement to put up electric power lines over someone's property.

Education IRA (Coverdell)
A special type of nondeductible IRA to which taxpayers can contribute a set amount per year per beneficiary, beginning in 1998. The Education IRA was established under the Taxpayer Relief Act of 1997. To be considered tax free, the money withdrawn from this IRA must be allocated for qualified higher-education expenses.

Electronic check
Electronic version of a paper check, including date, payee name, payment amount and signature. Electronic checks (e-checks) are meant for paying bills, transferring funds or any purpose where a paper check is used. Such checks bear a digital signature security code proving payment was authorized bye the account holder.

Electronic Funds Transfer (EFT)
Transfer of funds between accounts by electronic means rather than conventional paper-based payment methods, such as check writing. An electronic funds transfer is any financial transaction originating from a telephone, electronic terminal, computer or magnetic tape.

Encumbrance
Anything that affects or limits the title to a property, such as outstanding mortgages, easement rights or unpaid property taxes.

Endorse
To sign your name on the back of a check in order to cash it or deposit it.

Equity
The value in which the owner has in real estate over and above the mortgages against it. When the mortgage and all other debts against the property are paid in full, the owner has 100% equity in his property.

Escheat
Transfer of property subject to state intestacy statutes to a governmental entity because there is no one eligible to inherit the property under such laws.

Escrow
Funds and/or deed left in trust to a third party. Generally, a portion of the monthly mortgage payment is held in escrow by the lender to pay for taxes, hazard insurance and yearly mortgage insurance premiums.

Estate
All the property interests a person owns, including property over which the person exercises decisive control.

Executor (Executrix)
A representative responsible for distributing property when an individual dies with a valid will. Also known as a personal representative (PR) in some states.

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F

Fiduciary
An individual or organization that has discretionary authority or control over a qualified plan trust, its assets or its administration, or who-for compensation-provides investment advice regarding plan assets.

Fiduciary Duty
An affirmative duty of utmost good faith and full and fair disclosure of all material facts.

Fiduciary Relationship
A relationship between two parties in which one (the fiduciary) has a huge duty to act in good faith for the benefit of the other.

Financial Institution
A business that deals with money. For example, a bank or credit union.

First Mortgage
A mortgage that has a primary lien against a property.

Five-Year Rule
An IRS rule stating that all of a deceased's funds in qualified plans, IRAs and so forth must be distributed within five years of the end of the year in which the individual died. The only exception to this is when the retirement vehicle names a designated beneficiary.

Fixed-Rates Mortgage
A mortgage with an interest rate and monthly payments that remain constant over the life of the loan.

Fixture
Property, such as a hot water heater or plumbing fixture, that has become permanently attached to piece of real estate and goes with the property when it is sold.

Flood Certification
An independent agency report required by the lender to determine whether a property is located in a flood hazard zone, which would then require a federally mandated flood insurance policy.

Foreclosure
A legal procedure in which property mortgaged as security for a loan is sold to pay the defaulting borrower's debt.

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G

Graduated Payment Mortgage
A fixed rate loan with monthly payments that starts low, increasing by a fixed amount for a specific number of years. After that period, the payments typically remain constant for the duration of the loan.

Grace Period
Pertains to loans. A time period allowed for making payments on a loan. Payments made after the due date, but within this 10-15 day period depending on the terms of the loan, are considered timely payments and not subject to late charges or other penalties.

Grantor
Pertains to a trust. The grantor is the individual who creates and usually provides initial funding to the trust for the benefit of the trust beneficiaries.

Gross Income
Normal income, including overtime, prior to any payroll deductions that is regular and dependable. This income may come from more than one source.

Guardian
A court-appointed fiduciary responsible for the person of a minor on incompetent person.

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H

Hazard Insurance
Insurance protection against damage to a property from fire, windstorms, and other common hazards.

Homeowner's Insurance
An insurance policy that covers the dwelling and its contents in case of fire or wind damage, theft, liability for property damage and personal liability.

HUD-1 Form
See Real Estate Settlement Statement.

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I

Income Property
Real estate that is owned for investment purposes and not used as the owner's residence.

Indirect Rollover
A transfer of cash or other property between qualified plans or IRAs in which the owner takes temporary receipt of the funds. The rollover is tax-free and without penalty if completed by the 60 th day after the distribution from an IRA or employer plan.

Individual Retirement Account (IRA)
A pension plan that any individual with earned income can establish and fund. An individual may contribute no more than $2,000 in one year to the account. Depending on the taxpayer's circumstances, the contribution may be fully deductible, partially deductible or not deductible. All investment earnings accumulate tax deferred until distributions are received at retirement. Tax penalties are assessed for early withdrawals from an IRA. Early withdrawals are generally classified as those that take place before an individual attains age 59½.

Insufficient Funds
See Bad Check

Insufficient Funds Fee
The fee that is charged by a financial institution or business when a check does not clear.

Interest
A charge paid for the use of money.

Interim Financing
See Bridge Loan.

Irrevocable Trust
A trust that the grantor cannot revoke.

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J

Joint Tenancy With Right of Survivorship (JTWROS)
A form of property ownership by any two or more individuals. Interests in the property are considered to be equal, so any income earned on the property is taxed equally to each owner. If an owner dies, his or her interest in the property passes automatically to the other joint owner(s), avoiding probate. At death a deceased owner must include one half of the property if owned jointly with only a spouse, or all of the property if owned jointly with a nonspouse unless it can be proved that surviving owners contributed to the original purchase.

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K

No terms listed.

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L

Land Contract
When the buyer agrees to make payments directly to the seller at pre-negotiated terms. The seller agrees to deed the property to the buyer upon completion of the agreement. The buyer becomes the owner of equity in this type of sale. (Also see Owner Financing .)

Less Cash Received
The amount of cash you get back when you make a deposit.

Liability
A legally enforceable claim on the assets of a company, excluding owner's equity, or the property of an individual, calling for a transfer of assets at a determined future date.

Lien
A legal claim on a property used as security for a debt.

Living Trust
( Also Inter Vivos Trust) A trust created during the grantor's lifetime to be operative during his or her lifetime.

Loan-To-Value Ratio
The relationship between the amount of the mortgage and property value, usually shown as a percentage.

Lump-Sum Distribution
A pension plan distribution that occurs at a single point in time.

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M

Market Value
The price at which a property will sell, assuming a knowledgeable buyer and seller, both operating without undue pressure.

Maturity Date
The date when principal must be repaid to a bondholder.

Memo
The area on a check that notes what the check was written to pay for.

Minimum Balance
The balance you must keep in a checking account in order to avoid being charged a service fee.

Minimum Required Distribution (RMD)
An amount that must be withdrawn from a retirement account once a certain age is reached.

Money Market Deposit Account
Available through banks and savings and loan associations. Earning rates are determined by the institution, and they tend to be lower than rates for money market funds. Money market deposit accounts are FDIC insured (check for current coverage). Check writing privileges are typically available, although they may be restricted.

Money Order
A form of check payment on which the financial institution prints the exact amount covered. Anyone can cash it if it is not completely filled out.

Mortgage
A contract in which a borrower's property is pledged as security for a loan which is to be repaid on an installment basis.

Mortgage Note
A written promise to pay a debt at a stated interest rate during a specified term. The agreement is secured by a mortgage.

Mortgagee
The lender in a mortgage contract.

Mortgagor
The borrower in a mortgage contract.

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N

Negative Amortization
A loan in which the outstanding principal balance goes up instead of down because the monthly payments are not large enough to cover the full amount of interest due. Also called deferred interest.

Net Worth
The residual value after liabilities are subtracted from assets. Net worth represents the amount that is owned by the individual or family, unencumbered by debt.

Normal Retirement Age
Generally, the age at which full Social Security old age benefits are available. When this term is used in qualified plan documents, it may refer to an age that differs from the Social Security normal retirement age, namely, the earlier of: the normal retirement age specified in the plan; or the later of age 65 or five years after plan participation began.

NOW (Negotiable Order of Withdrawal)
A checking account that pays interest and allows you to write checks.

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O

Offer to Purchase
A written proposal to buy a piece of real estate that becomes binding when accepted by the seller. Also called a sales contract.

Origination Fee
A fee charged for the work involved in the evaluation preparation and submission of a proposed mortgage loan.

Outstanding Check
A check that is still going through financial institution processing.

Overdraft
When your account goes below zero-there is not enough money to cover the withdrawal.

Owner Financing
A purchase in which the seller provides all or part of the financing.

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P

Partnership
A closely held business in which two or more owners are involved. The business is not incorporated.

Personal Identification Number (PIN)
A numeric identification code used by bank customers when making transactions at a self-service electronic banking terminal, such as an automated teller machine (ATM). A secret number that allows only you to use your ATM/Debit/Credit card.

PITI
An acronym for payments to lender that cover principal, interest, taxes and insurance on a property.

Plat
A map of a piece of land showing boundary lines, streets, actual measurements and easements.

Point
A fee paid to the lender on closing day to increase the effective yield of the mortgage. A point is one percent of the amount of the mortgage loan. Also called a discount point.

Power of Attorney
A written document executed by one person who authorizes another person to act on his or her behalf.

Prepayment Penalty
A charge paid to the lender by the borrower if a mortgage loan is repaid before its term is over.

Pre-Approval
A commitment by a lender to extend credit provided that specific conditions are met.

Pre-authorized Bill Payment
Your bank automatically pays your bills, so you do not have to write checks.

Pre-Qualification
A preliminary assessment of a buyer's ability to secure a loan, based on a specific set of lending guidelines and buyer representations made. This is not a guarantee or commitment by a lender to extend credit.

Prime Rate
The interest rate charged by banks to their preferred corporate customers, it tends to be an estimator for general trends in short term interest rates.

Principal
The amount borrowed or remaining unpaid; also, that part of the monthly payment that reduces the outstanding balance of a mortgage.

Probate
The legal process of administering and distributing the probate estate.

Probate Estate
Property handled and distributed by a personal representative or administrator upon a person's death; property generally disposed of by will or according to the state's intestacy laws.

PMI (Private Mortgage Insurance)
Insurance written by a private mortgage insurance company to protect the lender against losses caused by mortgage default. This is commonly required on loan transactions involving less than a 20% down payment or equity position.

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Q

Qualified Pension Plan
A pension plan that receives favorable income tax treatment by virtue of meeting federal requirements, such as nondiscriminatory funding practices.

Qualifying Ratios
Guidelines used by lenders to determine how much of a loan a homebuyer qualifies for. Often referred to as debt-to-income ratios (or DTI).

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R

Real Estate Settlement Statement
Final settlement statement often referred to as the HUD-1 form, used to itemize buyer, seller, broker, and lender charges and credits at closing.

Realtor
A real estate broker or sales associate affiliated with the National Association of Realtors.

Reconcile
A process to make sure your account balance matches your financial institution's balance for your account.

Recording a Transaction
The act of writing down transactions in your check register. See Transaction.

Recording Fee
The charges made by the register of deeds to record legal documents.

Revocable Trust
A trust that may be revoked after creation.

Refinancing
Repaying a debt with the proceeds of a new loan, using the same property as collateral or security.

Right of Survivorship
A right inherent in some forms of property ownership which entitles surviving owners to succeed to a deceased owner's interest in the property outside of probate.

Rollover
Pertains to retirement plans. It involves moving funds from one retirement plan to another.

Roth IRA
A nondeductible IRA with several unique features. Withdrawals are not taxable if the owner is at least 59½ and the account is at least 5 years old. The owner may continue to make contributions to the account after he or she is age 70½, and there is now required beginning date for withdrawals.

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S

Savings Account
An interest bearing deposit account without a stated maturity, as opposed to a Time Deposit.

Savings Bond
A U.S. government bond earning variable, market-based interest that is sold to the public through depository financial institutions and Federal Reserve Banks.

Second Mortgage
A loan issued on property that is already encumbered by an existing mortgage (i.e.: the first mortgage). The second mortgage is subordinate to the first.

Secondary Mortgage Market
The market wherein home loans are sold by the lender after closing to Fannie Mae, Freddie Mac or a variety of other institutional investors.

Series EE Bond
A registered bond that is a U.S. government obligation. These bonds are issued at a discount to be redeemable at face value on the stated maturity date, with the difference being interest earned. They make no current interest payments.

Settlor
The person who creates a trust.

Simplified Employee Pension Plan (SEP)
A retirement plan used by small businesses that is relatively easy and inexpensive to administer. Individual retirement accounts or annuities are registered in the employee's name, and the employer makes contributions in accordance with established agreements.

Social Security
A government program whereby covered workers meeting certain past-service requirements and their qualified dependents are eligible for limited retirement, medical, disability and death benefits. The program is funded through a special income tax on covered workers.

Sole Proprietorship
A closely held business in which there is a single owner. The business is not considered a separate entity from the person for tax, liability, or other purposes.

Statement
The record you receive periodically from your financial institution that lists all of the activities in your account.

Stop Payment
An order issued to halt payment on a check that usually results in a bank fee to the check writer.

Survey
A map prepared by an engineer or surveyor charting a particular piece of real estate.

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T

Testamentary Trust
A trust that is created under a will or inter vivos trust provision and does not become operative until after the creator's death.

Title
Ownership of a property. A clear title is one without any outstanding liens or encumbrances. A cloud on title refers to any outstanding liens or encumbrances that could impair the title.

Title Insurance Policy
A policy designed to protect the buyer or lender after closing from financial losses arising from any defects in the title that may have occurred prior to purchase.

Title Search
A check of public record to disclose the past and current facts regarding ownership of a particular piece of property.

Transaction
When money goes into, or out of, your account. Can include deposits, withdrawals, payments, fees, ATM transactions or transfers.

Transfer Tax
In some areas city, county or state taxes imposed when property passes from one person to another.

Truncation
System in which a bank keeps cancelled checks on file or sends a list or image(s) of them in each periodic statement to the account holder.

Trust
A fiduciary arrangement set up by a grantor whereby property is held and managed for a named beneficiary by a third party known as a trustee.

Trustee
The person or organization that holds legal title to the property held in trust. The
trustee holds and manages the property for the benefit of the beneficiary.

Truth-In-Lending
Federal law that requires lenders to disclose the terms and conditions of a mortgage, including the APR, based on certain charges incurred by the borrower. If the charges were $0, the APR would be equal to that actual interest rate on the loan.

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U

Underwriting
The process of evaluating a loan application to determine the risk involved for the lender.

Uniform Gifts to Minors Act (UGMA)
Laws enacted in many states that enable limited types of gifts to minor children.

Uniform Transfers to Minors Act (UTMA)
Laws enacted in many states that enable a broad range of gifts to minor children.

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V

Void
This means that a check is not good or not usable. You would write, “VOID” across a check that has a mistake written on it, tear it up and throw it away. You must keep a record of voided checks on your check stub or register.

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W

Withdrawal
When you take money out of your account. This can be by check, ATM, automatic payment or other methods.

Wisconsin Uniform Transfer to Minor Account (WUTMA)
See UTMA

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X

No terms listed.

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Y

No terms listed.

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Z

No terms listed.

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