Glossary of Terms

A-Credit

This is someone who has a superb credit score, usually over 720. Consumers with this type of credit are eligible for most any loan or credit account they wish to open with little or no reservation.

Acceleration clause

This is a provision in a contract that allows a lender to call due a loan or credit at any time if an account is not performing satisfactorily (i.e. if payments are being made late or not at all). A loan that goes into default is an example of when an acceleration clause is usually invoked – requiring that the borrower immediately pay the total balance remaining.

ARM

Adjustible Rate Mortgages are home loans where the rate for the loan may adjust upward or downward at any time after an initial period of stability (often 3-5 years). Factors that will change the rate of the loan include current market conditions.

Balloon Loan or Mortgage

A mortgage that typically offers low rates for an initial period of time (usually 5, 7, or 10) years; after that time period elapses, the balance is due or is refinanced by the borrower.

FICO

A single numerical score, based on an individual's credit history, which measures that individual's credit worthiness. The most widely used credit score is called FICO for Fair Issac Co. which developed it. Numbers for a FICO score generally range from 400 (very poor) to 850 or higher (extremely good).

Jumbo Loan

Otherwise Known As a non-conforming loan, is a loan that exceeds Fannie Mae's and Freddie Mac's loan limits. Freddie Mac and Fannie Mae loans are referred to as conforming loans.

Private Mortgage Insurance (PMI)

This is insurance usually required by lenders for homeowners who do not put at least 20% down when buying a home. It is payable as a part of the mortgage until the 20% minimum equity has been reached in the home at which time it may be discontinued at the borrower’s request.

Truth-in-Lending

This law affects lenders across the banks and requires them to use a standardized format when revealing the terms and conditions of a loan to potential borrowers.