Professional Documents
Culture Documents
Administrator
The individual or institution appointed by a court to oversee the settlement of the estate of a
A document in which the purchaser agrees to buy certain real estate (or personal property) and
the seller agrees to sell under stated terms and conditions. Also called sales contact, binder or
Amortization
Gradual debt reduction. Normally, the reduction is made according to a pre-determined schedule
Annual Exclusion
The amount of money or property (currently $10,000 for an individual and $20,000 for a married
couple) that may be given as a gift to a recipient each year without incurring a gift tax. The
A term used in the Truth in Lending Act to represent the cost of a loan as a yearly rate.
Annuity
An interest-bearing contract between an individual and a life insurance company that guarantees
Appraisal
home.
Appreciation
Beneficiary
Bequest
High-quality, common stock of well-known companies with extended records of earnings and
Generally, these stocks are the choice of investors seeking long-term growth.
Bond
A debt instrument that is a "promise to pay" issued by corporations, federal and state goverments,
and municipalities to raise capital. The bond issuer promises to pay the holder of the bond the
principal amount of the loan when the bond matures and a fixed rate of interest periodically during
Borrower
One who receives funds in the form of a loan with the obligation of repaying the loan in full with
interest.
One who receives a commission or fee for bringing buyer and seller together and often assisting in
Building Code
The local regulations that control design, construction, and materials used in construction. Building
Bull/Bear
Terms frequently used to describe the outlook for short-and long-term market performance:
• bull refers to the belief that stock prices are likely to rise;
Capital Gains
The difference between the cost basis and the amount for which you sold the stock
price, a capital gain results. If the asset is sold for less than
Certificate of Deposit
An arrangement between an investor and a financial institution which calls for the financial
institution to pay a specific rate of interest over a set period of time. Certain deposits are FDIC
Refers to a charge against an estate to settle an agreement or an outstanding obligation (as in the
Closing
The consummation of a transaction. In real estate, closing includes the delivery of a deed,
financial adjustments, the signing of notes, and the disbursement of funds necessary to the sale or
loan transaction.
Closing Agent/Attorney
A closing agent or attorney assures that all documentation related to the sale of a house has been
completed properly, including the title search and title insurance. The closing agent explains all
closing documents to the buyer and the seller, obtains their signatures where necessary and
Closing Costs
All of the costs to the buyer and seller individually that are associated with the purchase, sale, or
refinancing of real property. They include, but are not limited to, prorating of agreed items such as
taxes and rents, the cost of title insurance policies, and the cost of credit reports, recording fees
A financial disclosure giving an account of all funds received and expected at the closing, including
the escrow deposits for taxes, hazard insurance, and mortgage insurance.
Codicil
Collateral
Property pledged as security for a debt, such as real estate as security for a mortgage.
Commission
An agent's fee for negotiating a real estate or loan transaction, often expressed as percentage of
Commitment
An agreement, often in writing, between a lender and a borrower to loan money at a future date
Common Stock
Units of ownership that give voting rights to shareholders. (See Preferred Stock.)
Condominium
A form of ownership of real property. The purchaser receives title to a particular unit and a
Contingency
A condition that must be met before a contract is binding. For example, the sale of a house might
Contract of Sale
A contract between a purchaser and a seller of real property to convey a title after certain
Conventional Loan
A mortgage loan not insured by the Federal Housing Administration or guaranteed by the Veterans
Administration.
Cost Basis
The purchase price, including commissions and other expenses, used to determine capital gains
Credit Report
A report to a prospective lender on the credit standing of a prospective borrower, used to help
Cyclical Stocks
A general term used to refer to taxes against property or the transfer of assets upon the death of
the owner, including all estate and inheritance taxes. Sometimes referred to as estate taxes.
Debt-To-Income Ratio
Debt expenses as a percentage of monthly income. Lenders use this ratio to qualify borrowers for
Deduction
For tax purposes, the portion of an estate that does not generate tax (such as a marital deduction).
Discount Broker
As opposed to full service brokers, a discount broker charges a lower fee for executing buy and
sell orders at the direction of the investor. Generally, discount brokers do not provide investment
advice.
Diversification
The practice of investing among several categories of investments (including different industries,
Dividend
Periodic distribution of earnings to stockholders, in the form of cash or additional shares of stock.
Donee/Donor
The average performance of certain blue chip stocks, generally regarded as an indication of how
Earnest Money
Equity
The home owner's interest in a property; the difference between fair market value and the current
Escrow Account
An amount set up by the lender into which the borrower makes periodic payments, usually
monthly, for taxes, hazard insurance, assessments, and mortgage insurance premiums. The funds
are held in trust by the lender who pays the sums as they become due.
Executor
The individual named in a will charged with carrying out the provisions specified in the will. A co-
The price at which property is transferred between a willing buyer and a willing seller, each of
whom has reasonable knowledge of all pertinent facts and neither being under any compulsion to
buy or sell.
A division of the Department of Housing and Urban Development. Its main activity is the insuring
A private corporation created by Congress to support the secondary mortgage market. It sells
participation certificates secured by pools of conventional mortgage loans; principal and interest is
guaranteed by the federal government through the FHLMC. Popularly known as Freddie Mac.
A private corporation created by Congress to support the secondary mortgage market. FNMA sells
interest on these securities is backed by the US Government. Popularly known as Fannie Mae.
Fiduciary
An individual or institution responsible for acting in the best interests of another party. A fiduciary
is bound by law and duty to put aside personal interests and act in good faith when making
First Mortgage
A real estate loan that creates a primary claim against real property.
Fixed-Income Securities
Debt obligations issued by corporations, goverments, or goverment agencies which pay a fixed
rate of interest over a defined time period. Bonds and certain mortgage-backed securities are the
The first $10,000 in gifts that an individual can give tax free to another during a calendar year.
The amount will be indexed for inflation after 1998. (See Annual Exclusion.)
Grantor
The amount of consistent and stable income that an individual receives each month, averaged
over a period of time. This amount includes overtime pay, bonuses, commissions and income from
dividends or interest, provided that the individual can show a consistent history of receiving such
income.
Growth Stock
Stock of a corporation with a record of faster-than-average sales and earnings. Growth stock
Guardian
An individual or institution named by a court to manage the property of a person who is adjudged
Hazard Insurance
A contract that pays for loss on a home from certain hazards, such as fire. (See Homeowner's
Policy)
Heir
One who inherits from the estate of a person who has died.
Homeowners Association
to maintain and provide community facilities and services for the common enjoyment of the
residents.
Homeowners Policy
A multiple peril insurance policy commonly called "package policy". It is available to owners of
private dwellings and covers the dwelling and contents in the case of fire or wind damage, theft,
A home owner's monthly housing expense as a percentage of his or her monthly income.
Income Stock
Common stock that pays dividends at a higher-than-average rate, resulting in a higher yield for
stockholders. Income stock frequently in preferred by investors who seek current income in
addition to growth.
Index
Any of a number of composites that reflect movement in financial markets, indicating market
prices and shares outstanding of companies included in the index. Examples are: the Down Jones
Industrial Index, the Russell 2000 Index, Standard & Poor's 500 Composite Stock Index, and the
EAFE Index.
Index Fund
A fund managed with the objective of duplicating the performance of securities in a broad-based
A method of planning for retirement that enables individuals to save up to $2,000 annually. These
funds, called contributions, are in addition to any retirement plan already in place by the
Match Plan for Employees, the employee will be able to make a pre-tax elective contribution to an
IRA of up to $6,000 annually. IRA funds are tax-deferred, that is, not subject to tax until
withdrawals are made, when the individual may be in a lower tax bracket. (See Tax-Deferred
Investment).
A special IRA that is established specifically for taxable funds distributing from a tax-qualified
retirement plan. As in the case of a regular IRA, funds are not subject to tax until they are
Inspector
The property/mechanical inspector examines a home to evaluate its plumbing, electrical work,
Interest
• Money paid for the use of money -- that is, paid for a loan.
Intestate
An account whereby a financial institution is given discretionary power with regard to investment
decisions on behalf of the investor. Fees for this service vary, but usually are based on a
Irrevocable Trust
Joint Ownership
Also called joint tenancy, this phrase refers to ownership of property by two or more persons,
generally with right of survivorship (upon the death of one owner, the surviving owner or owners
assume ownership).
Last Will
Literally, the will last executed by an individual, which revokes any former existing wills.
Liquidity
The flexibility of being able to obtain the cash value of investments without incurring significant
loss.
Living Trust
Living Will
A legal document in which an individual states, in advance of final illness or injury, his or her
Load
A sales charge associated with buying shares in some mutual funds. (See No-Load Fund.)
Loan-To-Value Ratio
The relationship between the amount of a home loan and the total value of the property. For
example, if you receive a loan of $95,000 on a home that costs $100,000, the loan-to-value ratio
is 95 percent.
Lock-In-Rate
A commitment from a lender to make a loan at a preset interest rate at some future date, usually
for not more than 60 days. A fee may be charged to "lock-in" a rate.
Market Value
The highest price that a willing buyer would pay and the lowest a willing seller would accept.
Money Market
The market for short-term debt instruments. Money market investments include Treasury bills,
Mortgage
Mortgage Insurance
A policy that allows mortgage lenders to recover part of their financial losses from an insurance
company if a borrower fails to fully re-pay a loan. Mortgage insurance makes it possible for
Any person or institution that invests in mortgages. By buying mortgage loans from lenders, the
mortgage investor gives the lender funds that can be used for more lending.
A type of term life insurance. The amount of coverage decreases as the mortgage balance declines.
In the event that the borrower dies while the policy is in force, the debt is automatically paid by
insurance proceeds.
Mutual Fund
An investment company that enables investors to pool their funds in order to invest in a managed
portfolio of securities.
PITI
Principal, Interest, Taxes, and Insurance are the components of a mortgage payment.
Point
A dollar amount paid to a lender for making a loan. A point is 1 percent of the loan amount. Also
Portfolio
Power of Appointment
The power given by an individual to another in a will or trust document to determine which
A legal document authorizing one individual to act as the agent or "attorney" for another (the
"principal"). If the attorney is authorized to act in behalf of another for all matters, he or she has
general power of attorney. Authority to act solely regarding specified situations is special power of
attorney. If the authority granted extends beyond the disability of the principal, the attorney has
Principal
Preferred Stock
A class of stock that has preference over common stock in the event of the liquidation of a
company's assets. Typically, preferred stockholders do not have voting rights. (See Common
Stock.)
Prime Rate
Probate
Prospectus
A booklet that provides full disclosure of relevant information about a security being offered for
sale.
"Prudent Investor" Rule
Legal term that refers to the duty of the fiduciary to invest and manage assets in the best
interests of another.
Remainderman
In the case of a trust, this term refers to the individual who will receive the principal of a trust
RESPA is a federal law that requires lenders to provide home mortgage borrowers with information
Return
Revocable Trust
A type of trust that can be terminated by the settler (the opposite of an irrevocable trust).
Risk
Servicer
After a mortgage loan closes, the loan servicer collects the payments, manages escrow accounts,
pays escrowed taxes and insurance, and manages delinquent payments. Lenders often "release"
servicing to another business, which means that a home buyer will not necessarily send house
Settlor
Share
Step Up In Basis
The change in the value of an asset inherited upon the owner's death. The taxable gain is
calculated based on the fair market value at the time of death, not the fair market value at the
Stock Split
A method of reducing stock price by allocating newly issued stock to shareholders according to
An individual or institution taking the place of a trustee or executor unable to continue the
Tax-Deferred Investments
An investment whose earnings are not subject to state or federal tax until the investor assumes
Testate
Making and leaving a valid will; an individual who dies without having made a will is said to have
died intestate.
Title
Title Insurance
Insurance which provides for the payment of a specific amount of funds for loss caused by defects
Trust
A legal, fiduciary relationship in which an individual or institution (the trustee) holds legal title to
property with the responsibility for keeping or managing this property for the benefit of another
person or beneficiary.
Trust Agreement
A legal document that establishes a trust and outlines the rules and guidelines affecting its
Unified Credit
A federal tax credit that offsets gift and estate tax liability.
U.S. Treasury Securities
Debt obligations secured by the full faith and credit of the U.S. government. Income generated by
these securities is subject to federal tax, but exempt from state and local tax.
Veterans Administration VA
An independent agency of the federal government created in 1930. The VA home loan guaranty
Will
A legal document expressing the wishes of an individual regarding distribution of his or her
Zoning
City or county laws specifying how property may be used in specific areas.