Glossary
Account holder
The person or business that owns a bank account and is legally responsible for it.
Account takeover
A type of fraud in which a criminal gains access to your account and makes unauthorized transactions or changes.
ACH (Automated Clearing House)
A nationwide electronic network used to move money between bank accounts, such as direct deposits, automatic bill payments, and transfers.
Actual cash value (ACV)
A way of valuing a claim that pays the cost to replace damaged property minus depreciation.
Adjustable-rate mortgage (ARM)
A mortgage with an interest rate that can change on a schedule described in the promissory note. After any initial fixed-rate period, the rate is based on a market index plus a margin set by the lender, subject to any rate caps. The initial rate is often lower than that of a comparable fixed-rate mortgage, but payments can increase when the rate adjusts.
Amortization
Paying off a debt through scheduled, regular payments over the loan term. Each payment covers interest and part of the principal. If a loan is fully amortized, the entire debt is repaid when the last scheduled payment is made.
Annual escrow analysis
A yearly review of your escrow account to compare what was collected with what was paid for taxes and insurance. It may result in a payment change, a refund of a surplus, or a request to cover a shortage.
Annual percentage rate (APR)
The yearly cost of credit expressed as a percentage. For a loan, APR includes the interest rate plus certain fees and charges, such as points, mortgage insurance, and some closing costs. Because it reflects more than the interest rate alone, APR helps borrowers compare loan offers.
Annual percentage yield (APY)
The total amount of interest earned on a deposit account over one year, expressed as a percentage, including the effect of compounding. APY makes it easier to compare savings products.
Appraisal
A professional estimate of a property's market value, typically completed by a licensed or certified appraiser and usually required by the lender before approving home financing.
Asset-based lending
Business financing secured by company assets such as accounts receivable, inventory, or equipment.
Auto insurance
Insurance that covers financial losses related to your vehicle, such as accidents, theft, and liability for injuries or damage to others.
Auto loan
A loan used to buy a vehicle, secured by the vehicle itself.
Automatic payment (AutoPay)
A recurring payment set up to be withdrawn from your account on a scheduled date.
Available balance
The amount of money in an account that can be used right now. It may differ from the current (ledger) balance because of pending transactions or holds on deposited funds.
Beneficiary
A person or organization named to receive the funds in an account, insurance policy, or trust when the owner dies.
Bill pay
An online or mobile banking service that lets you pay bills electronically from your bank account.
Business checking account
A checking account designed for a business's daily operations, kept separate from personal finances.
Buydown
A payment made at closing to lower the interest rate used to calculate the borrower's principal and interest (P&I) payment for a period of time. A temporary buydown reduces the rate for the first few years; for example, a 3-2-1 buydown lowers the rate by 3 percentage points in year one, 2 in year two, and 1 in year three. Starting in year four, the payment is based on the rate shown in the note. A permanent buydown, usually through discount points, lowers the rate for the life of the loan. Buydowns may be paid by the borrower, seller, builder, lender, or another third party.
Cash-out refinance
A refinance in which the new loan is larger than the existing mortgage balance, and the borrower receives the difference in cash.
Cashier's check
A check guaranteed by the bank and drawn on the bank's own funds, often required for large purchases such as closing on a home.
Certificate of deposit (CD)
A deposit account that pays a fixed interest rate for a set term, such as 6 months or 5 years. Withdrawing funds before the maturity date usually results in an early withdrawal penalty.
Checking account
A deposit account designed for everyday transactions, such as debit card purchases, bill payments, checks, and transfers.
Claim
A formal request to an insurance company for payment under the terms of a policy.
Closing
The final step in a real estate or loan transaction, when documents are signed, funds are disbursed, and ownership or the loan becomes official. Also called settlement.
Closing costs
Fees and expenses paid at closing in addition to the down payment, such as lender fees, appraisal fees, title insurance, recording fees, and prepaid items.
Closing Disclosure
A five-page form that gives final details about your mortgage, including loan terms, projected monthly payments, and closing costs. You should receive it at least three business days before closing so you can compare it with your Loan Estimate.
Co-signer
A person who signs a loan with the primary borrower and agrees to be responsible for repaying the debt if the borrower does not.
Collateral
An asset, such as a home, vehicle, or savings account, pledged to secure a loan. If the borrower doesn't repay, the lender may take the collateral.
Collision coverage
Auto insurance that pays for damage to your vehicle from a collision with another vehicle or object.
Commercial real estate (CRE) loan
A loan used to buy, build, or refinance property used for business purposes, such as office buildings, retail space, or warehouses.
Compound interest
Interest earned on both the original deposit and on interest that has already been added to the account.
Comprehensive coverage
Auto insurance that pays for damage to your vehicle from events other than a collision, such as theft, fire, hail, or hitting an animal.
Conforming loan
A conventional mortgage that meets the guidelines and loan limits set by Fannie Mae and Freddie Mac.
Construction loan
A short-term loan used to finance the building of a home or other real estate project. Funds are usually released in stages (draws) as construction progresses. Some construction loans convert to a permanent mortgage once the work is complete (construction-to-permanent).
Consumer Financial Protection Bureau (CFPB)
A U.S. government agency that oversees consumer financial products and services and enforces federal consumer financial laws.
Conventional loan
A mortgage that is not insured or guaranteed by a government agency such as FHA, VA, or USDA.
Covenant
A condition in a loan agreement that the borrower must meet, such as maintaining certain financial ratios or providing financial statements.
Credit approval
A preliminary lender decision that, based on credit, income, assets, and employment, the borrower qualifies for a mortgage at a specified amount and loan type. An underwriter has reviewed documents such as the credit report, bank statements, pay stubs, and W-2s. Final approval still requires an acceptable appraisal and property review, any additional documentation requested, and confirmation before closing that the borrower's financial situation has not changed. A credit approval may be obtained before shopping for a home and is more thorough than a prequalification.
Credit card
A revolving line of credit that lets you borrow up to a set limit for purchases, with a required minimum monthly payment.
Credit limit
The maximum amount you can borrow on a credit card or line of credit.
Credit report
A record of your credit history, including accounts, balances, payment history, and inquiries, maintained by credit reporting agencies such as Equifax, Experian, and TransUnion.
Credit score
A number, commonly between 300 and 850, that summarizes your credit history and helps lenders estimate how likely you are to repay a debt.
Current (ledger) balance
The balance in an account at a given time, including all posted transactions but not pending transactions or holds.
Debit card
A card linked to your checking account that withdraws funds directly from the account when you make purchases or ATM withdrawals.
Debt service coverage ratio (DSCR)
A measure of a business's or property's ability to repay debt, calculated by dividing net operating income by total debt payments. A ratio above 1.0 means income exceeds debt payments.
Debt-to-income ratio (DTI)
Your total monthly debt payments divided by your gross monthly income. Lenders use DTI to assess your ability to manage new payments.
Declarations page
The page of an insurance policy summarizing key details, including the insured, covered property, coverage limits, deductibles, and premium.
Deductible
The amount you pay out of pocket on a claim before your insurance coverage begins to pay.
Deferment
An agreement that allows a borrower to postpone certain payments, which are usually moved to the end of the loan or repaid later.
Delinquency
When a loan payment is late or missed.
Deposit hold
A temporary delay before deposited funds become available to use. Hold periods are disclosed in the bank's funds availability policy.
Direct deposit
An electronic deposit of funds, such as a paycheck or government benefit, straight into a bank account.
Discount points
See Points.
Dormant account
An account with no customer-initiated activity for an extended period. If an account stays inactive long enough, state law may require the bank to turn the funds over to the state as unclaimed property (escheatment).
Down payment
The portion of the purchase price paid by the buyer rather than financed, equal to the difference between the sales price and the loan amount. The down payment is brought to closing along with any closing costs owed by the buyer.
Down payment assistance program (DPA)
Programs that provide funds, often to first-time homebuyers, to reduce the cash needed for a down payment or closing costs. Assistance may come as a grant, which does not need to be repaid; a forgivable second mortgage, which may need to be repaid only if certain events occur within a set period (for example, selling or refinancing the home); or a repayable second mortgage, which typically has a low or zero interest rate. Terms and eligibility vary by program.
Early withdrawal penalty
A fee charged for taking money out of a CD or other time deposit before its maturity date.
Earnest money deposit
A deposit made when a purchase offer is accepted, showing the buyer's good-faith intent to buy the home. It is usually held by a title company, escrow company, or real estate broker and applied toward the down payment or closing costs at closing.
Employer identification number (EIN)
A unique number assigned by the IRS to identify a business for tax purposes, often required to open a business account.
Equal housing lender
A lender that complies with the Fair Housing Act and Equal Credit Opportunity Act, which prohibit discrimination in lending.
Equipment financing
A loan or lease used to buy business equipment, typically secured by the equipment itself.
Equity
The difference between your home's current market value and the amount you still owe on it.
Escrow account (impound account)
An account the loan servicer sets up to collect a portion of your monthly payment to pay property taxes and homeowners insurance on your behalf.
Escrow shortage
When your escrow account doesn't have enough money to cover upcoming tax or insurance bills, often because those costs increased.
Escrow surplus
When your escrow account has more money than needed. Surpluses above a certain amount are generally refunded to the borrower.
FDIC insurance
Protection provided by the Federal Deposit Insurance Corporation for deposits at insured banks if the bank fails. The standard coverage amount is $250,000 per depositor, per insured bank, for each account ownership category. FDIC insurance does not cover investment products, annuities, or insurance products, even if purchased through a bank.
FHA loan
A mortgage insured by the Federal Housing Administration, a part of the U.S. Department of Housing and Urban Development (HUD). FHA loans typically allow lower down payments and more flexible credit guidelines than many conventional loans and require mortgage insurance premiums. Loan limits vary by county.
First-time homebuyer program
Mortgage programs with special qualifying terms for buyers who have never owned a home or have not owned one recently (often defined as within the past three years). Programs vary by state and lender and may include down payment and closing cost assistance.
Fixed-rate mortgage
A mortgage with an interest rate that stays the same for the entire loan term, so the principal and interest payment does not change.
Flood insurance
Insurance that covers damage from flooding, which standard homeowners policies typically exclude. Lenders require flood insurance for homes in designated high-risk flood zones.
Forbearance
A temporary pause or reduction in loan payments granted by the servicer during a financial hardship. Interest may continue to accrue, and the missed amounts must be repaid later.
Force-placed insurance (lender-placed insurance)
Insurance the servicer buys on a property when the borrower's own homeowners insurance lapses. It is usually more expensive and may provide less coverage than a policy you buy yourself.
Foreclosure
The legal process a lender uses to take ownership of and sell a property after the borrower fails to make payments as agreed.
Grace period
The number of days after a payment's due date during which you can pay without being charged a late fee.
Hard inquiry
A credit check that occurs when you apply for credit. Hard inquiries can temporarily lower your credit score.
Hazard insurance
The portion of a homeowners policy that covers damage to the home's structure from events such as fire, wind, or hail. Lenders often use this term when requiring coverage.
Home equity line of credit (HELOC)
A revolving line of credit secured by your home's equity. You can borrow as needed during a draw period and then repay during a repayment period. Rates are usually variable.
Home equity loan
A lump-sum loan secured by your home's equity, typically with a fixed rate and fixed monthly payments.
Homeowners association (HOA) dues
Regular fees paid by owners in certain communities, condominiums, or townhome developments to cover shared maintenance, amenities, and services.
Homeowners insurance
Insurance that covers damage to your home and belongings and provides liability protection. Lenders require it for most mortgages.
Identity theft
The use of another person's personal information, such as a Social Security number or account details, without permission to commit fraud.
Index
A published financial benchmark that reflects market conditions and is used to set the interest rate on an adjustable-rate mortgage or other variable-rate loan. The index plus the lender's margin equals the fully indexed rate, which determines rate and payment changes over the life of the loan, subject to any rate caps.
Individual retirement account (IRA)
A tax-advantaged account for retirement savings. Common types include Traditional IRAs and Roth IRAs. Consult your tax professional about eligibility and tax treatment.
Installment loan
A loan repaid in fixed payments over a set period, such as an auto loan, personal loan, or mortgage.
Insured
The person or entity covered by an insurance policy.
Interest rate
The percentage a bank pays on deposits, or charges on borrowed money, usually stated as a yearly rate.
Joint account
An account owned by two or more people, each of whom typically has full access to the funds.
Jumbo loan
A mortgage that exceeds the conforming loan limits set for Fannie Mae and Freddie Mac.
Late fee
A charge added when a payment is not received by the end of the grace period.
Liability coverage
Insurance that pays for injuries or property damage you are legally responsible for causing to others.
Lien
A legal claim against a property used as security for a debt, such as a mortgage or unpaid taxes. Liens generally must be paid off or released before the property can be sold or refinanced with clear title.
Life insurance
Insurance that pays a benefit to named beneficiaries when the insured person dies. Common types include term life and permanent (whole or universal) life.
Line of credit
A flexible loan that lets you borrow up to a set limit, repay, and borrow again as needed.
Loan Estimate
A three-page form you receive within three business days of applying for a mortgage. It shows the estimated interest rate, monthly payment, and closing costs, making it easier to compare offers.
Loan modification
A permanent change to one or more terms of a loan, such as the interest rate, term, or balance, to make payments more affordable for a borrower facing hardship.
Loan servicer
The company that handles your loan after closing, including collecting payments, managing escrow, answering questions, and assisting with payment difficulties. Your servicer may differ from the lender that made your loan.
Loan-to-value ratio (LTV)
The loan amount divided by the property's appraised value or purchase price, whichever is lower, expressed as a percentage. A lower LTV usually means less risk for the lender.
Lockbox service
A service in which the bank receives and processes a business's incoming payments, speeding up deposits.
Loss mitigation
Options a servicer may offer to help a borrower avoid foreclosure, such as forbearance, repayment plans, loan modification, short sale, or deed-in-lieu of foreclosure.
Margin
The fixed percentage a lender adds to the index on an adjustable-rate mortgage to determine the interest rate when it adjusts. The margin is set at closing and generally does not change for the life of the loan.
Maturity date
The date a CD, bond, or loan term ends. For a CD, it is when you can withdraw funds without penalty.
Merchant services
Services that let a business accept credit card, debit card, and digital payments from customers.
Minimum balance
The lowest amount you may need to keep in an account to avoid a fee or to earn a stated interest rate.
Mobile deposit
A feature that lets you deposit a check by taking a picture of it with the bank's mobile app.
Money market account
A savings account that typically pays a higher interest rate than a standard savings account and may offer limited check-writing. It may require a higher minimum balance.
Mortgage
A loan used to buy or refinance a home, secured by the property. In some states, a deed of trust is used instead of a mortgage.
Mortgage insurance
Insurance that protects the lender, not the borrower, if the borrower stops making payments. On conventional loans, private mortgage insurance (PMI) is typically required when the down payment is less than 20%. FHA loans require a mortgage insurance premium (MIP), and USDA loans charge a guarantee fee. VA loans do not require mortgage insurance but generally charge a funding fee.
Mortgage loan originator (MLO)
A licensed or registered professional who takes mortgage applications and helps borrowers choose loan options. MLOs are registered in the Nationwide Multistate Licensing System (NMLS) and have a unique NMLS ID.
Mortgagee clause
A provision in a homeowners insurance policy naming the lender, so the lender is protected and notified of policy changes or cancellation.
Multi-factor authentication (MFA)
A security method that requires two or more ways to verify your identity, such as a password and a one-time code sent to your phone.
NMLS ID
A unique identification number assigned by the Nationwide Multistate Licensing System to mortgage companies and loan originators, which consumers can use to verify licensing.
Nonsufficient funds (NSF)
A situation where an account does not have enough available money to cover a transaction. The bank may return the item unpaid and may charge a fee.
Online banking
Access to your accounts through the bank's website or mobile app to view balances, transfer money, pay bills, and manage services.
Overdraft
When a transaction is paid even though it causes the account balance to go below zero. Fees may apply.
Overdraft protection
A service that links your checking account to another account, such as savings or a line of credit, to cover transactions when your checking balance is too low.
Payable on death (POD)
A designation that lets an account owner name a beneficiary who will receive the account funds when the owner dies, without going through probate.
Payoff statement
A document from the servicer showing the exact amount needed to pay off a loan in full as of a specific date, including principal, interest, and any fees.
Person-to-person (P2P) payment
An electronic payment sent directly from one person to another, often using a phone number or email address.
Personal guarantee
A promise by a business owner to repay a business loan personally if the business cannot.
Personal loan
An installment loan that can be used for many purposes, such as consolidating debt or paying for large expenses. Personal loans may be unsecured or secured.
Phishing
A scam in which criminals pose as a trusted company through email, text, or phone calls to trick you into sharing personal or account information. Banks will not ask for your password or one-time codes.
PITI
Acronym for the total monthly housing payment: principal, interest, taxes, and insurance.
Points
Fees paid at closing to lower a loan's interest rate. Each point costs 1% of the loan amount. A loan with points paid at closing will usually have a lower rate than the same loan without points. Points may be tax-deductible; consult your tax professional.
Policy
The contract between you and an insurance company describing what is covered, the limits, and the cost.
Policy limit
The maximum amount an insurer will pay for a covered loss.
Positive pay
A fraud-prevention service, usually for businesses, that compares checks or ACH debits presented for payment against a list the business has approved.
Preapproval
A lender's conditional commitment, based on a review of your credit and financial documents, stating how much you may be able to borrow. A preapproval is more reliable than a prequalification.
Premium
The amount you pay for insurance coverage, typically monthly, semiannually, or annually.
Prepaid items
Costs paid at closing in advance, such as homeowners insurance premiums, daily interest until the first payment, and initial deposits into the escrow account.
Prepayment penalty
A fee some loans charge if you pay off all or part of the loan early. Your loan documents state whether one applies.
Prequalification
An early estimate of how much a prospective homebuyer may be able to borrow, usually based on information the buyer provides. It is not a loan approval or commitment to lend.
Prime rate
A benchmark interest rate that many banks use as a starting point for setting rates on loans such as lines of credit and credit cards.
Principal
The amount borrowed, or the remaining balance owed, not including interest.
Principal curtailment (prepayment)
An extra payment applied directly to the loan's principal balance, which can reduce total interest and shorten the loan term.
Privacy notice
A disclosure explaining how a financial institution collects, uses, and shares your personal information, and your options to limit sharing.
Promissory note
The legal document a borrower signs promising to repay the loan, stating the amount, interest rate (note rate), payment schedule, and term.
Rate lock
An agreement in which the lender guarantees a specific interest rate and points for a set period, provided the loan closes before the lock expires. Extending an expired lock may involve a fee.
Refinance
Replacing an existing loan with a new one, often to lower the interest rate, change the loan term, or access home equity.
Remote deposit capture (RDC)
A service that lets a business scan and deposit checks electronically from its office.
Renters insurance
Insurance that covers a tenant's personal belongings and liability, but not the building itself.
Repayment plan
An agreement with your servicer to catch up on past-due amounts by adding a portion to your regular payments over a set period.
Replacement cost
A way of valuing a claim that pays to repair or replace damaged property with new property of similar kind and quality, without deducting for depreciation.
Reverse mortgage
A loan available to eligible homeowners age 62 or older that lets them convert part of their home equity into cash without making monthly mortgage payments. The loan is generally repaid when the borrower sells the home, moves out permanently, or passes away.
Revolving credit
Credit that can be used, repaid, and used again up to a set limit, such as a credit card or home equity line of credit.
Rider (endorsement)
An addition to an insurance policy that changes or expands its coverage.
Routing number
A nine-digit number that identifies a bank or credit union in the United States. It is used with your account number for direct deposits, wire transfers, and electronic payments.
Savings account
A deposit account that earns interest and is intended for holding money you don't need for daily spending.
SBA loan
A business loan partially guaranteed by the U.S. Small Business Administration, often offering longer terms or lower down payments than conventional business loans. Common programs include the SBA 7(a) and 504 loans.
Secured loan
A loan backed by collateral.
Servicing transfer
When the right to service your loan moves to a different company. You should receive written notice, and the terms of your loan do not change.
Short sale
The sale of a home for less than the amount owed on the mortgage, with the lender's approval, as an alternative to foreclosure.
Soft inquiry
A credit check that does not affect your credit score, such as when you check your own credit or a lender prequalifies you.
Statement
A periodic record, usually monthly, listing an account's transactions, fees, interest, and balances.
Stop payment
A request that the bank not pay a specific check or recurring electronic payment that has not yet been processed. Fees may apply.
Sweep account
An account arrangement that automatically moves funds above or below a set balance between a business checking account and an interest-earning or credit account.
Term loan
A business loan for a fixed amount repaid over a set period, often used for expansion, equipment, or real estate.
Title
The legal right to own and use a property.
Title insurance
Insurance that protects a property owner or lender against financial loss from covered defects in the title, such as undisclosed liens, encumbrances, or errors in public records or the title search. A lender's policy protects the lender; an owner's policy protects the buyer.
Treasury management (cash management)
A set of banking services that help businesses manage cash flow, including payments, collections, fraud prevention, and liquidity tools.
Umbrella insurance
Additional liability coverage that goes beyond the limits of your home and auto policies.
Underwriting
The process a lender uses to evaluate a loan application, including the borrower's credit, income, assets, and the property, to decide whether to approve the loan and on what terms.
Uninsured/underinsured motorist coverage
Auto insurance that protects you if you are hit by a driver who has no insurance or not enough insurance to cover your costs.
Unsecured loan
A loan that is not backed by collateral and is approved based mainly on your creditworthiness.
USDA rural home loan
A mortgage backed by the U.S. Department of Agriculture for eligible properties in designated rural and some suburban areas. The USDA Guaranteed Loan Program allows financing up to 100% of the purchase price (no down payment) for borrowers who meet income limits. Loans are made by USDA-approved lenders.
VA loan
A mortgage guaranteed by the U.S. Department of Veterans Affairs for eligible veterans, active-duty service members, and certain surviving spouses. VA loans often require no down payment and no monthly mortgage insurance, though a funding fee usually applies. Both fixed-rate and adjustable-rate options may be available.
Wire transfer
A fast electronic transfer of funds between banks, domestically or internationally. Wires are generally final and difficult to reverse once sent.
Working capital line of credit
A revolving line of credit that helps a business cover short-term operating expenses, such as payroll or inventory.
