This A–Z glossary distills the most important banking, lending, and mortgage terminology into a single, structured reference. It covers how money moves, how credit is evaluated, how loans are priced, and how mortgages are structured—from APR to Underwriting to Yield Curve. Use it as a quick‑reference guide for financial literacy, loan shopping, or mortgage preparation.
A
- Amortization — Scheduled repayment of a loan over time, with each payment covering interest plus principal.
- APR — Annual Percentage Rate; total yearly cost of borrowing including interest and fees.
- ARM — Adjustable‑Rate Mortgage with interest that changes periodically.
B
- Balloon Payment — Large lump‑sum due at the end of certain loans.
- Basis Points — Units equal to 0.01% used to measure rate changes.
- Borrower — Person or entity taking out a loan.
C
- Closing Costs — Fees paid at mortgage closing (title, appraisal, taxes, etc.).
- Collateral — Asset pledged to secure a loan.
- Credit Score — Numerical rating of creditworthiness.
D
- Debt‑to‑Income Ratio — Percentage of monthly income used for debt payments.
- Deed — Legal document transferring property ownership.
- Default — Failure to meet loan obligations.
E
- Escrow — Third‑party account holding funds for taxes, insurance, or closing.
- Equity — Property value minus outstanding mortgage balance.
- Earnest Money — Buyer’s deposit showing intent to purchase a home.
F
- FHA Loan — Government‑insured mortgage with low down‑payment requirements.
- Fixed‑Rate Mortgage — Loan with an interest rate that never changes.
- Foreclosure — Lender takes property due to nonpayment.
G
- GFE — Good Faith Estimate; outlines expected loan costs (now replaced by Loan Estimate).
- Grace Period — Extra time to make a payment without penalty.
- Guarantor — Person who promises to repay if borrower defaults.
H
- HELOC — Home Equity Line of Credit; revolving credit secured by home equity.
- HUD‑1 — Closing statement used in certain real‑estate transactions.
- Home Appraisal — Professional estimate of property value.
I
- Interest Rate — Cost of borrowing expressed as a percentage.
- Interest‑Only Loan — Borrower pays only interest for a set period.
- Index Rate — Benchmark rate used to adjust ARM loans.
J
- Jumbo Loan — Mortgage exceeding conforming loan limits.
- Joint Account — Bank account owned by two or more people.
- Judgment Lien — Court‑ordered claim against property for unpaid debt.
K
- KYC — “Know Your Customer” identity verification rules.
- Key Rate — Central bank benchmark interest rate.
- Kick‑Out Clause — Allows seller to accept a better offer under certain conditions.
L
- LTV Ratio — Loan amount divided by property value.
- Loan Estimate — Standardized disclosure of mortgage terms and costs.
- Lien — Legal claim on property until debt is paid.
M
- Mortgage — Loan secured by real estate.
- MIP — Mortgage Insurance Premium for FHA loans.
- Margin — Fixed percentage added to an ARM index to determine rate.
N
- Negative Amortization — Loan balance increases because payments don’t cover interest.
- Note Rate — Interest rate stated on the mortgage note.
- Non‑Recourse Loan — Lender can only claim collateral, not personal assets.
O
- Origination Fee — Lender charge for processing a loan.
- Overdraft — Spending more than account balance, triggering a fee.
- Open‑End Credit — Revolving credit like credit cards or HELOCs.
P
- PMI — Private Mortgage Insurance required with low down payments.
- Principal — Amount borrowed excluding interest.
- Prepayment Penalty — Fee for paying off a loan early.
Q
- Qualifying Ratio — Ratios lenders use to assess borrower affordability.
- Quitclaim Deed — Transfers property rights without guaranteeing clear title.
- Qualified Mortgage — Loan meeting federal ability‑to‑repay standards.
R
- Refinance — Replace an existing loan with a new one.
- Rate Lock — Lender guarantee of a fixed interest rate for a set period.
- Reserves — Savings required to cover future mortgage payments.
S
- Servicer — Company that manages loan payments and escrow.
- Settlement Statement — Final breakdown of closing costs.
- Subprime Loan — Higher‑risk loan for borrowers with lower credit scores.
T
- Title Insurance — Protects against ownership disputes or title defects.
- Term — Length of time to repay a loan.
- Truth in Lending Act — Federal law requiring clear disclosure of loan terms.
U
- Underwriting — Lender evaluation of borrower risk.
- USDA Loan — Rural housing loan with low or zero down payment.
- Unsecured Loan — Loan not backed by collateral.
V
- VA Loan — Mortgage for veterans with no down‑payment requirement.
- Variable Rate — Interest rate that changes over time.
- Verification of Employment — Lender confirmation of borrower’s job and income.
W
- Waiver — Agreement to give up a right or requirement.
- Wire Transfer — Electronic movement of funds between banks.
- Workout — Agreement to modify loan terms to avoid default.
X
- X‑Signature — Mark used as a legal signature when a person cannot sign normally.
- X‑Collateralization — Using one asset to secure multiple loans.
- XBRL — Financial reporting standard used by banks and regulators.
Y
- Yield — Return earned on an investment or loan.
- Yield Curve — Graph showing interest rates across different maturities.
- Yield Spread — Difference between two interest rates.
Z
- Zero‑Down Mortgage — Loan requiring no down payment.
- Zero‑Coupon Bond — Bond sold at a discount with no periodic interest.
- Zoning — Local rules governing land use and property development.
