The contract governing your open-end credit account, which provides information on changes that may occur to the account.
The payment history of an account over a specific period, including the number of times the account was past due or over limit.
Any and all persons designated and authorized with the bank to transact business on behalf of an account.
Interest that has been earned but not yet paid.
Also known as a variable-rate mortgage. The initial interest rate is usually below that of conventional fixed-rate loans. The interest rate may change over the life of the loan as market conditions change. These changes will affect the payment amount.
The date that the interest rate changes on an adjustable-rate mortgage (ARM).
The period elapsing between adjustment dates for an adjustable-rate mortgage (ARM).
An analysis of a buyer's ability to afford the purchase of a home. It reviews income, liabilities and available funds, and takes into consideration the type of mortgage you plan to use, the area where you want to purchase a home and the likely closing costs.
The process of reducing debt through regular installment payments of principal and interest that result in the payoff of a loan at maturity.
The length of time required to amortize the mortgage loan expressed in months. For example, 360 months is the amortization term for a 30-year fixed-rate mortgage.
The cost of credit on a yearly basis, expressed as a percentage.
A percentage rate reflecting the total amount of interest paid on a deposit account. This is based on the interest rate and the frequency of compounding for a 365-day year.
A written analysis prepared by a qualified appraiser to estimate the value of a property.
An opinion of a property's fair market value, based on an appraiser's knowledge, experience and analysis of the property.
Anything owned by a person or a business that has monetary value, including land, a dwelling or personal property.
The method of transferring a right or contract from one person to another.
When an outstanding mortgage and its terms are transferred from the current owner to a buyer. This generally requires a credit review of the new borrower, and lenders may charge a fee for the assumption. If a mortgage contains a due-on-sale clause, it may not be assumed by a new buyer.
The fee paid to a lender (usually by the purchaser) when an assumption takes place.
A computerized facility used by member depository institutions to electronically combine, sort and distribute inter-bank credits and debits.
This machine allows you to deposit and withdraw cash anytime without needing to visit a bank during business hours.
This refers to when funds deposited into an account will be available for withdrawal.
This is a bank's policy as to when funds deposited into an account will be available for withdrawal.
The account balance, minus any funds preauthorized or held (such as outstanding debit card transactions or deposited check holds). Pending ACH transactions are not included in the available balance.
A financial statement that shows assets, liabilities and net worth as of a specific date.
A loan that provides you with lower-than-usual monthly payments for a set period of time followed by a payment larger than usual at the end of your loan repayment period. While a balloon loan may lower your monthly payments, it can also mean you make higher interest payments over the life of the loan.
A large lump-sum payment due at the end of the loan term to repay the remainder of the principal.
A customer statement that shows all deposits made, all checks paid and other debits posted during the period (usually one month), as well as the current balance.
Income before taxes are deducted.
A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity or other contract.
The 26 (sometimes 27) biweekly payments that are equal to one-half of the monthly payment required if the loan were a standard 30-year fixed-rate mortgage. The result for the borrower is a substantial savings in interest.
A short-term loan option usually used to help the borrower buy a new property before their current home is sold.
Any day on which offices of a bank are open to the public for carrying on the bank's business.
When the seller, builder or buyer pays an amount of money up front to the lender to reduce monthly payments during the first few years of a mortgage. Buydowns can occur in both fixed- and adjustable-rate mortgages.
A check that has been cleared by the bank it was pulled from, never to be used again after it has been deposited or cashed.
A ceiling rate for the maximum interest rate that can be charged on a variable-rate loan or adjustable-rate mortgage (ARM).
Capital ratio compares a financial institution’s funds with the amount of risk it has taken on, in an effort to measure financial health and the ability to withstand unexpected losses. It’s calculated by dividing current assets by current liabilities.
A savings tool from a bank or credit union that has a fixed maturity date and a fixed interest rate.
A document issued by the federal government certifying a veteran’s eligibility for a Department of Veterans Affairs (VA) mortgage.
A document issued by the Department of Veterans Affairs (VA) that establishes the maximum value and loan amount for a VA mortgage.
A check for which the bank verifies enough money is in the respective account to cover it.
The frequency (in months) of payment and/or interest rate changes in an adjustable-rate mortgage (ARM).
A written order instructing a financial institution to pay immediately on demand a specified amount of money from the check writer's account to the person named on the check.
A demand-deposit account subject to withdrawal of funds by check, debit card or transfer.
A meeting held to finalize the sale of a property. The buyer signs the mortgage documents and pays closing costs. This is also called a “settlement.”
These are expenses – over and above the price of the property – that are incurred by buyers and sellers when transferring ownership of a property. Closing costs normally include an origination fee, property taxes, charges for title insurance and escrow costs, appraisal fees, etc.
Assets that are offered to secure a loan or other credit. For example, if you get a real estate mortgage, the bank's collateral is typically your house.
An organization that handles the preparation of reports used by lenders to determine a potential borrower's credit history. The agency gets data for these reports from a credit repository and other sources.
Offers you a set interest rate and payments that do not change throughout the life, or “term,” of the loan. A conventional fixed-rate loan is fully paid off over a given number of years – usually 15, 20 or 30. A portion of each monthly payment goes toward paying back the money borrowed, or the “principal,” with the rest being interest.
An individual who signs the note of another person as support for the credit of the primary signer. The cosigner becomes responsible for the obligation.
A report detailing an individual's credit history that is prepared by a credit bureau and used by a lender to determine a loan applicant's creditworthiness.
This measures a consumer's credit risk relative to the rest of the U.S. population, based on the individual's credit usage history. Higher scores represent lower credit risks, which typically result in better loan terms.
A time of day established by a bank for receipt of deposits. After the cut-off time, deposits are considered received on the next banking day.
An account entry representing money you owe a lender or money that has been taken from your deposit account.
This allows the account owner to access their funds electronically. Debit cards may be used to obtain cash from automated teller machines, or purchase goods or services using point-of-sale systems. The use of a debit card involves immediate debiting and crediting of consumers’ accounts.
The percentage of a consumer’s monthly gross income that goes toward paying debts. Generally, the higher the ratio, the higher the perceived risk. Loans with higher risk are generally priced at a higher interest rate.
This occurs upon failure to make loan payments on a timely basis or comply with other loan requirements.
A payment postponed until a future date.
A debt that was not paid when due.
A payment that is electronically deposited into an individual's account at a depository institution.
In an adjustable-rate mortgage (ARM) with an initial rate discount, the lender gives up percentage points in interest to reduce the rate and lower the payments for part of the mortgage term (usually for one year or less). After the discount period, the ARM rate usually increases according to its index rate.
Part of the purchase price of a property that is paid in cash and not financed with a loan.
This is regular interest a bank grants to customers’ deposits, essentially in the form of a discount, to offset service charges.
A borrower's normal annual income, including overtime, that is regular or guaranteed. Salary is usually the principal source, but other sources of income may qualify if they are significant and stable.
Implemented by Regulation E (Reg E), the act establishes the basic rights, liabilities and responsibilities of consumers who transfer funds initiated through an electronic terminal, telephone, computer or magnetic strip. The primary objective of the act is to protect individual consumers engaging in electronic funds transfers (EFT). In other words, those who open a deposit account primarily for personal, family or household purposes.
The transfer of money between accounts by consumer electronic systems, such ATMs and electronic payment of bills, rather than by check or cash.
The difference between the fair market value (appraised value) of your home and your outstanding mortgage balances and other liens.
A contractual arrangement in which a third party receives and disburses money or property for the primary transacting parties, with the disbursement dependent on conditions agreed to by the transacting parties.
The part of a mortgage monthly payment that is held by the servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments and other items as they become due.
A congressionally chartered, shareholder-owned company that is the nation's largest supplier of home mortgage funds.
A government corporation that insures the deposits of all national and state banks that are members of the Federal Reserve System.
The central bank of the U.S. The Fed, as it is commonly called, regulates the U.S. monetary and financial system.
Also known as a government mortgage, this is a mortgage that is insured by the Federal Housing Administration (FHA).
One of the most widely used credit scores in U.S. mortgage loan underwriting. Calculated based on information in your credit report, this three-digit number, which ranges from 300 to 850, helps lenders determine how likely you are to repay a loan. It affects how much you can borrow, how many months you have to repay and the interest rate.
An undertaking to act as executor, administrator, guardian, conservator or trustee for a family trust, authorized trust or testamentary trust (or receiver or trustee in bankruptcy).
The total cost of credit a customer must pay on a consumer loan, including interest.
The primary lien against a property.
The monthly payment due on a mortgage loan, which includes both principal and interest.
A loan where the interest rate and the payment remain the same over the life of the loan. The consumer makes equal monthly payments of principal and interest until the debt is paid in full.
The amount of uncollected funds represented by checks in the possession of one bank but drawn on other banks, or the time that elapses between the day a check is deposited and the day it is presented for payment to the financial institution on which it is drawn.
A legal process in which property that is collateral or security for a loan may be sold to help repay the loan when the loan is in default.
Chartered by Congress in 1970 to provide stability and affordability to homeownership and rental housing, Freddie Mac doesn’t lend directly to borrowers, but purchases loans on the secondary mortgage market to allow lenders to provide loans to more borrowers.
An adjustable-rate mortgage with a monthly payment that is sufficient to amortize the remaining balance at the interest accrual rate, over the amortization term.
A government-owned corporation that assumed responsibility for the special assistance loan program formerly administered by Fannie Mae. This is popularly known as Ginnie Mae.
A party who agrees to be responsible for the payment of another party’s debts, should that party default.
A line of credit secured by the equity in a consumer’s home. Interest paid on the loan is generally tax-deductible. (Consult a tax advisor, regardless.) The funds may be accessed by writing checks against the line of credit or by getting a cash advance.
A home equity loan allows you to tap into your home’s built-up equity, which is the difference between the amount that your home could be sold for and the amount that you still owe. This type of loan is sometimes referred to as a second mortgage or borrowing against your home.
This is the percentage of gross monthly income budgeted to pay housing expenses.
A document that provides an itemized listing of the funds that are payable at closing. Items that appear on the statement include real estate commissions, loan fees, points and initial escrow amounts. The totals at the bottom of the HUD-1 statement define the seller's net proceeds and the buyer's net payment at closing.
A combination of a conventional fixed-rate mortgage and adjustable-rate loan – also called a 2/1, 3/1, 5/1 or 7/1 – that can offer the best of both worlds: lower interest rates (like ARMs) and a fixed payment for a longer period than most ARMs.
This is the measure of interest rate changes a lender uses to decide how much an interest rate on an adjustable-rate mortgage will change over time.
A retirement savings program for individuals to which yearly tax-deductible contributions up to a specified limit can be made. The amount contributed is not taxed until withdrawn. Withdrawal is not permitted without penalty until the individual reaches age 59 1/2.
The regular periodic payment that a borrower agrees to make to a lender.
When a depositor’s checking account balance is inadequate to pay a check presented for payment.
Deposits held in financial institutions that are guaranteed by the FDIC against loss due to bank failure.
A mortgage that is covered by insurance protects the lender in case you're unable to make your mortgage payments due to default or foreclosure.
The fee charged for borrowing money or the interest earned on bank savings.
Refers to the accumulated interest charges recognized in accounts but not yet paid. In most cases, it is also the rate used to calculate the monthly payments.
The amount paid by a borrower to a lender in exchange for the use of the lender’s money for a certain period of time. Interest is paid on loans or on debt instruments, such as notes or bonds, either at regular intervals or as part of a lump-sum payment when the issue matures.
For an adjustable-rate mortgage, this is the maximum interest rate, as specified in the mortgage note.
For an adjustable-rate mortgage, this is the minimum interest rate, as specified in the mortgage note.
An account owned by two or more persons. Either party can conduct transactions separately or together as set forth in the deposit account contract.
Writing a check in an amount that will overdraw the account, but making up the deficiency by depositing another check on another bank. For example, mailing a check for the mortgage when your checking account has insufficient funds to cover the check, but counting on receiving and depositing your paycheck before the mortgage company presents the check for payment.
The penalty a borrower must pay when a payment is made a stated number of days after the due date.
A person's financial obligations, which include long-term and short-term debt.
Legal claim against a property. Once the property is sold, the lien holder is then paid the amount that is owed.
For an adjustable-rate mortgage, this is a limit on the amount that payments can increase or decrease over the life of the mortgage.
For an adjustable-rate mortgage, this is a limit on the amount that the interest rate can increase or decrease over the life of the loan.
A pre-approved loan authorization with a specific borrowing limit based on creditworthiness. A line of credit allows borrowers to obtain a number of loans without re-applying each time, as long as the total of borrowed funds doesn’t exceed the credit limit.
A cash asset or an asset that is easily converted into cash.
A sum of borrowed money (principal) that is generally repaid with interest.
This is a sum of money given to bind the sale of real estate, or to ensure payment or an advance of funds in the processing of a loan.
The ratio of the loan principal (amount borrowed) to the appraised value (selling price). For example, on a $100,000 home with a mortgage loan principal of $80,000, the LTV is 80%. The LTV will affect programs available to the borrower. Generally, the lower the LTV, the more favorable the program terms offered by lenders.
The guarantee of an interest rate for a specified period by a lender (including loan term and points, if any) to be paid at closing.
The number of percentage points the lender adds to the index rate to calculate the adjustable-rate mortgage interest rate at each adjustment.
The date on which the principal balance of a loan becomes due and payable.
The minimum dollar amount that must be paid each month on a loan, line of credit or other debt.
A savings account that offers a higher interest rate in exchange for larger-than-normal deposits. Insured by the FDIC, these accounts have limits on the number of transactions allowed and may require higher balances to receive the higher interest rate.
That portion of the total monthly payment that is applied toward principal and interest.
A legal document that pledges a property to the lender as security for payment of a debt.
A contract that insures the lender against loss caused by a mortgagor's default on a government mortgage or conventional mortgage. Mortgage insurance can be issued by a private company or a government agency.
The amount paid for mortgage insurance.
In the event that the borrower dies while the policy is active, the debt is automatically paid by insurance proceeds.
The borrower in a mortgage agreement.
A mutual bank is a financial institution that specializes in offering savings accounts and originating home mortgages, and is owned (but not controlled) by depositors. Mutual banks don’t report to shareholders, and they’re typically known for prioritizing community giving more than other financial institutions.
The value of a person's assets, including cash.
An asset that cannot easily be converted into cash.
A non-sufficient funds (NSF) fee occurs when a transaction is declined or returned because you do not have an adequate balance to cover the presented transaction.
A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period.
A service that allows an account holder to obtain account information and manage certain banking transactions through a personal computer via the financial institution's website on the internet.
A processing expense a lender charges a borrower when making a loan.
A check written by a depositor that has not yet been presented for payment to or paid by the depositor’s bank.
When the amount of money withdrawn from a bank account is greater than the amount actually available in the account.
An overdraft fee occurs when a transaction is paid when you do not have an adequate balance to cover the presented transaction.
To write a check for an amount that exceeds the amount on deposit in the account.
A property purchase transaction in which the party selling the property provides all or part of the financing.
The person or organization to whom a check, draft or note is made payable.
A bank upon which a check is drawn and that pays a check or other draft.
The date when a new monthly payment amount takes effect on an adjustable-rate mortgage.
The complete repayment of a loan, including principal, interest and any other amounts due. Payoff occurs either over the full term of the loan or through prepayments.
A formal statement prepared when a loan payoff is contemplated. It shows the current status of the loan account, all sums due and the daily interest rate.
The person or organization who pays.
A limit on the amount that payments can increase or decrease during any one adjustment period.
A limit on the amount that the interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might be.
Generally a four-character number, this is the secret code given to credit or debit cardholders, enabling them to access their accounts. The code is either randomly assigned by the bank or selected by the customer. It’s intended to prevent unauthorized use of the card while accessing a financial service terminal.
The activity of defrauding an online account holder of financial information by posing as a legitimate entity.
A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months (usually three).
1) The location at which a transaction takes place. 2) Systems that allow bank customers to transfer funds from their deposit accounts and other financial transactions at retail establishments.
A point is equal to 1% of the principal amount of your mortgage. For example, if you have a mortgage for $165,000, one point means $1,650 to the lender.
A written instrument that authorizes one person to act as another’s agent or attorney. The terms of the written power of attorney may specify when it will expire. If not, the power of attorney usually expires when the person granting it passes away.
The process of determining how much money you will be eligible to borrow before you apply for a loan.
Fund transfers approved in advance to recur at substantially regular intervals.
A system established by a written agreement under which a financial institution is authorized by the customer to debit the customer’s account in order to pay bills or make loan payments.
The payment of a debt before it becomes due.
A clause in a mortgage allowing the mortgagor to pay off part or all of the unpaid debt before it becomes due.
A penalty imposed on a borrower for repaying the loan before its due date. (In the case of a mortgage, this applies when there is not a prepayment clause in the mortgage note to offset the penalty.)
The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage.
The outstanding balance on a loan, excluding interest and fees.
The portion of a monthly payment that goes toward reducing the principal balance on a loan.
The four components of a monthly mortgage payment. Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing money. Taxes and insurance refer to the monthly cost of property taxes and homeowner’s insurance.
Insurance offered by a PMI company to protect lenders against loss if a borrower defaults. Most lenders generally require PMI for a loan with a loan-to-value percentage more than 80%, and the borrower pays the premium.
These are calculations used to determine if a borrower can qualify for a mortgage, taking into consideration housing expense as a percent of income ratio and total debt obligations as a percent of income ratio.
A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate and lender costs for a specified period.
A federal law that, among other things, requires lenders to provide "good faith" estimates of settlement costs and make other disclosures regarding the mortgage loan. RESPA also limits the amount of funds held in escrow for real estate taxes and insurance.
The noting in the registrar’s office of the details of a properly executed legal document, such as a deed, a mortgage note, a satisfaction of mortgage or an extension of mortgage, thereby making it a part of the public record.
A fee charged by a public official (typically a Registrar of Deeds or County Clerk) for including a document affecting the title to real property in the public record.
Paying off one loan with the proceeds from a new loan.
A way of obtaining a better interest rate, lowering monthly payments or borrowing cash on the equity in a property that has built up on a loan. A second loan is taken out to pay off the first, higher-rate loan.
Used as a means to implement the Electronic Fund Transfer Act (EFTA), Regulation E was put forth by the Federal Reserve Board to protect banking customers who use electronic methods to transfer money. It outlines the rules and procedures for electronic funds transfers (EFTs) and provides guidelines for debit card issuers.
To free a piece of real estate from a mortgage.
This is a special home loan product that allows a homeowner age 62 or older the ability to access the equity that has accumulated in their home. The home itself will be the source of repayment. The loan is underwritten based on the value of the collateral (home) and the life expectancy of the borrower. The loan must be repaid upon death, the sale of your home or when you no longer live there as your principal residence.
A credit agreement (typically for a credit card) that allows a customer to borrow against a preapproved credit line when purchasing goods and services. The borrower is only billed for the amount that is actually borrowed plus any interest due.
A type of safe usually located in groups inside a bank vault and rented to customers for their use in storing valuable items.
Where existing mortgages are bought and sold.
The property that will be pledged as collateral for a loan.
A charge assessed by a depository institution for processing transactions and maintaining accounts.
An organization that collects mortgage payments from borrowers and manages borrowers’ escrow accounts. The servicer often services mortgages that have been purchased by an investor in the secondary mortgage market. Gate City Bank retains the servicing on all mortgage loans.
The method used to determine the monthly payment required to repay the remaining balance of a mortgage, made in substantially equal installments over the remaining term of the mortgage, at the current interest rate.
A summary of all transactions that occurred over the preceding month and could be associated with a deposit account or a credit card account.
A mortgage that allows for the interest rate to increase according to a specified schedule (For example, seven years.), resulting in increased payments. At the end of the specified period, the rate and payments will remain constant for the remainder of the loan.
An order not to pay a check that has been issued but not yet cashed. If requested soon enough, the check will not be debited from the payer’s account. Most banks charge a fee for this service.
The period of time and the interest rate arranged between creditor and debtor to repay a loan.
When a lender uses another party to originate, process, underwrite, close, fund or package the mortgages it plans to deliver to the secondary mortgage market. Gate City Bank does not use third-party origination.
This is calculated by adding up total housing obligations as a percentage of gross monthly income, including monthly housing expenses, and other monthly debts.
An index used to determine interest rate changes for certain adjustable-rate mortgage plans.
A federal law that requires full disclosure of credit terms using a standard format. TILA is intended to facilitate comparison between lending terms offered by different financial institutions.
An extra layer of protection beyond a username and password that involves a second step in verifying your identity, such as through a text message with a temporary passcode, or a biometric factor like a fingerprint or facial scan.
These are issued in face-value denominations by the U.S. government, ranging from $50 to $10,000. They are typically long-term, low-risk investment tools.
The process of evaluating a loan application to determine the risk involved for the lender.