Terms You Should Know
Life is littered with buzzwords, lingo, and jargon. Let us help you make sense of what you see and hear. A glossary of the words you’ll find at Growella.
- 36 Percent Rule
A generic, out-dated mortgage affordability test which suggests that a mortgage applicants may not spend more than 36% of its monthly income on recurring debt.
- 529 Savings Plan
A tax-advanged savings plan for higher education, including college, trade school, and graduate school.
- Actual Cash Value
A method used by insurance companies to value your possessions. Roughly equal to what an item is worth in its current condition. Accounts for wear-and-tear, and time since purchase.
- Adjustable-Rate Mortgage
A mortgage for which the interest rate can change, but only after an initial period of up to 10 years.
- All-Inclusive Coverage
A type of insurance coverage within a condo building. Covers common areas and everything inside individual units, except for personal property such as jewelry or collections.
- Android Pay
A faster way to pay for something in a store. Hold an Android device over a sensor, and payment is made by credit card automatically.
- Annual Fee
The yearly cost for using a product, usually a credit card
- Apple Pay
A faster way to pay for something in a store. Hold an Apple device over a sensor, and payment is made by credit card automatically.
A piece of equipment that does a specific job, usually in a house. Examples: dishwasher, refrigerator, dryer.
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Annual Percentage Rate. A government calculation meant to show the true cost of borrowing money over long periods of time.
- Assumable Mortgage
A mortgage which can be passed along, interest rate and terms intact, to the next owner of a home.
- Automobile Insurance
A contract covering the costs of car repair, and other costs from an automobile accident. Mandatory for all U.S. drivers.
The amount of money in an account (e.g. bank account, retirement account); or, the amount of money due on a credit account (e.g.; student loan, credit card).
A legal process available to consumers and businesses by which debts are eliminated or reduced.
- Bare Walls Coverage
A type of insurance coverage within a condo building. Covers common areas only. Does not extend into individual condo units.
An exchange of goods or services without using money
- basis point
Equal to 1/100 of one percent, or 0.01%. Often abbreviated as “bps”.
- Boarder Income
Income earned from a person living in your home, or receiving meals or related services, temporarily.
- Bodily Injury Liability
A component of auto insurance coverage. Provides protection for an at-fault driver after a car accident from medical expenses, legal fees, loss of income, and the cost of a proper funeral, if required.
- Bumper-to-Bumper Warranty Coverage
A promise from a car manufacturer to pay for all required repairs between a car’s back bumper and front bumper. Protects car owners from defects in workmanship or material.
When an insurance company gives discounts to customers who have two or more policies. Also known as a “multi-line policy”.
- Business School
Graduate school that focuses on topics of business. Master of Business Administration (MBA) is its most common degree.
- Car Lease
A form of car ownership. Most commonly, a driver pays for the depreciation of the car, and returns the automobile to the original dealership after a pre-determined number of years.
- Cash Back
An incentive program that awards a cash refund to buyers after items are purchased.
- Cash Gift for Down Payment
A cash gift used by home buyers for down payment on a home, which requires no repayment whatsoever.
- Cash-Out Refinance
A mortgage refinance that results in a homeowner getting more than $2,000 cash-in-hand at closing.
A diploma for completing specific coursework and training, most often used by trade/vocational schools.
The status assigned to a mortgage application after a lender issues its final loan approval, and there is nothing left to do.
When money and keys are exchanged between a home buyer and home seller. The last step of buying a home.
- Closing Cost
A fee linked to the buying or selling of a home, that wouldn’t be payable if the home didn’t change ownership.
- Collision Coverage
A component of auto insurance coverage. Provides protection from the damage to a car from of a car accident, regardless of which driver is at-fault.
- Combined Rate
The sum of (Mortgage Rate) + (FHA MIP Rate). Example: 5.00% mortgage rate + 1.25% FHA MIP = 6.25% Combined Rate. Used for the FHA Net Tangible Benefit Test.
A sum of money paid for completing a task, usually linked to sales. Examples: Selling a home, attracting new customers.
- Comprehensive Coverage
A component of auto insurance coverage. Provides protection from theft; and, random events which may damage your car including fires, weather, and falling trees and structures.
A legal form of homeownership in which real estate is divided into units, which individuals can purchase and own.
- Condominium Master Insurance Policy
An insurance policy for the shared areas of a condo community. Covers damage, theft, and injury.
- Conforming Loan Limit
The maximum loan size eligible for backing by Fannie Mae and Freddie Mac as a conforming mortgage loan
- Conventional 97 Mortgage
The brand name for a mortgage allowing home buyers to make a downpayment of 3% on a home.
- Conventional Mortgage
A mortgage which conforms to the guidelines of Fannie Mae or Freddie Mac.
- Coverdell Education Saving Account
A tax-advantaged savings plan for education which can be used for primary, secondary schools in addition to college, trade school, and graduate school.
- Covered Peril
Items and events that are included and reimbursed as part of an insurance policy.
- Credit Bureaus
Companies that use a person’s personal information to determine their credit score. Experian, Equifax, and TransUnion are the three largest.
- Credit Card
A cash alternative used to buy things today, to be repaid at a later date.
- Credit Limit
The maximum “tab” you can run on your credit card at any one time.
- Credit Score
A number intended to reveal the likelihood of a person repaying money they’ve borrowed. High scores are better than low scores.
Something of known value, such as paper money and coins, which can be traded for goods and for services
- Days on Market
The number of days a home is listed for sale via the Multiple Listing Service (MLS).
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- Debit Card
A cash alternative that moves money from a bank account immediately to pay for a purchase.
The ratio of monthly debts to monthly income. Considered as part of mortgage approval.
- Debt-to-Income Ratio
The ratio of monthly household debt to monthly household income. Often abbreviated as DTI.
The amount of money a person must pay from their own savings after an accident or loss before an insurer will pay for the rest of the costs.
- Deferred Payments
Payments on a loan not due until some point in the future, either months or years.
- Delayed Financing
When a home buyer pays cash for a home, then uses a cash-out refinance to get that cash back within 6 months of the original closing date.
The reduction in something’s value over time, usually from regular use
- Direct Debit
A method for making payments to a company. The company stores your bank account information, and withdraws the cash when money is due.
- Direct Deposit
When money is sent to your bank account by an employer directly, or other person who is making payment to you.
- Direct Loan
A student loan made by the U.S. Department of Education.
- Direct PLUS Loan
Loans for parents of undergraduate students and for graduate school students. Used for expenses not covered by other financial aid.
- Discount Points
An optional, upfront, one-time fee paid by mortgage borrowers, giving access to lower mortgage rates.
Money that companies pay to their shareholders regularly from profits or cash reserves. Typically paid quarterly or annually.
Money that a company sends to its stockholders at regular intervals, usually at the start of a quarter.
The highest level of academic degree available to students. Examples: Medical Doctorate (M.D), Ph.D.
- Down Payment
The amount of cash that a home buyer pays toward the purchase of a home.
- Down Payment Assistance
Programs that give cash grants and loans to a home buyer.
- Down Payment Grant
A cash gift made to a home buyer that the home buyer never has to pay back.
- Dual Agency
When a real estate agent represents the buyer and the seller in the same real estate transaction
- Due on Sale
The legal requirement that a mortgage loan gets paid off when a home is sold, often using the cash from the sale.
- Emergency Fund
Money set aside for when life takes an unexpected turn, such as job loss or when health care costs not covered by insurance.
A low-cost health insurance plan that will not make payments if you need to see a doctor outside of its network of physicians.
Paying a prorated portion of your real estate taxes and homeowners insurance as part of your monthly mortgage payment.
- Fed Funds Rate
The interest rate at which U.S. banks lend money to each other overnight.
- Federal Housing Administration
Government agency whose purpose is to promote affordable homeowner for U.S. citizens. Created in 1934.
- Federal Reserve
The central bank of the United States. It’s dual-charter is to maintain stable prices and maximum employment within the economy.
- FHA MIP
The abbreviation for Federal Housing Administration Mortgage Insurance Premiums. FHA MIP is the insurance payment that is included in a monthly FHA mortgage payment.
- FHA Mortgage
A mortgage insured by the Federal Housing Administration (FHA). FHA mortgages are known for allowing low-down payments, and having flexible credit guidelines.
Abbreviation for Fair Isaac Corporation, which calculates consumer credit scores. Often used generically as a substitute for “credit score”.
- Fixed Interest Rate Loan
A loan for which the interest rate cannot change.
- Fixed-Rate Mortgage
A mortgage loan for which the interest rate cannot change.
When, during periods of market uncertainty, investors sell riskier assets and purchase safer assets.
- Flip Homes
To buy a home, make repairs, then attempt to sell the home at a profit.
- Foreign Transaction Fee
A charge applied to credit card purchases made internationally, usually equal to 3% of the purchase price. Sometimes called a Currency Conversion Fee.
A home’s state when no mortgage exists and no money is owed on it.
To be self-employed, performing a specific service, for one or many people at a time. Examples: Graphic design, dog walking, nanny.
- Full Glass Coverage
Optional coverage for auto insurance. Pays for a replacement windshield that’s been damaged by weather, rocks, or other debris.
- Gap Insurance
Optional coverage for auto insurance. Pays as cash the difference between what your car is worth, and what you currently owe on your loan or lease.
- Graduate School
A school for students to earn advanced academic degrees, including Master’s Degrees and Doctoral Degrees.
- Graduation Equivalent Diploma
Substitute for a high school degree which demonstrates that students have met the requirements of a high school-level education.
A cash gift, usually from an organization to an individual, which the individual never needs to repay.
- Health Insurance
Insurance which pays for a person’s medical and surgical expenses.
- Health Savings Accounts
A highly tax-advantaged savings account which is used to pay for a person’s health and medical expenses.
- High-Cost Area
U.S. regions in which housing costs are higher than national averages; for which conforming mortgage loan limits and FHA loan size floors are elevated.
Abbreviation for Health Maintenance Organization. A health insurance plan that prefers you to see doctors within its physician network, where costs can be lower.
- HO-6 Condo Insurance
Homeowners insurance for condominium owners. Covers damage, theft, and liability within a condominium unit. Does not cover flooding.
- Home Appraisal
The formal valuation process for a residential home, as performed by a state-licensed person.
- Home Equity Line of Credit
A subordinate, flexible-balance, adjustable-rate mortgage that converts home equity to cash on-demand. Often abbreviated as HELOC.
- Home Equity Loan
A subordinate, fixed-rate mortgage. Sometimes called a second mortgage or a junior loan.
- Home Inspection
A complete examination of a home and its appliances, performed by a licensed professional.
- Home Inspection Clause
An agreement between a home buyer and a home seller that gives rights to the buyer to negotiate for repairs, or to back out of the transaction, if a home inspection finds damage.
- Home Security System
Protection for a home against break-ins, robbery, water damage, fire, frozen pipes, carbon monoxide poisoning, and more.
- Homeowners Association
A management organization of homeowners within a planned community, such as a condominium or a subdivision. Sometimes abbreviated as HOA.
- Homeowners Insurance
Insurance which pays for damage to a home from accident or robbery. Also known as hazard insurance.
- Housing Market Index
A measure of homebuilder confidence in the U.S. single-family new construction housing market. Published by the National Association of Home Builders.
- Housing Start
When a builder breaks ground on a new unit of housing. Measured by the U.S. Census and reported in the monthly New Residential Construction report.
- In Trust
A home that is owned by an estate or entity, and not by an individual or individuals.
- Industry Conference
A large-scale meeting for people with similar interests, usually multi-day, featuring a mix of education and networking opportunities.
The rate of decrease in a currency’s purchasing power.
An agreement which provides a person with protection against the costs of accident, injury, and damage.
- Insurance Claim
A person’s formal request for cash payouts to an insurance company after damage has occurred.
A fee for borrowing money.
- Interest Rate
The rate at which interest is charged when a person borrows money.
A work-program for students and graduates, offering real-world job experience for periods of up to a year. May be paid or unpaid.
- Investor Overlay
Additional minimum loan qualifications beyond what’s required by a program’s mortgage guidelines.
Abbreviation for Internal Revenue Service. The division of the U.S. government responsible for the collection of federal income tax.
- Job Placement Services
Organizations that help members of a group, including military veterans and college graduates, find jobs.
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- Jumbo Mortgage
A home loan for which the loan size exceeds local mortgage loan limits.
- Kiddie Condo
The familiar name for a Federal Housing Administration (FHA) mortgage loan option which allows a child to buy a home with a parent’s co-signature. Often used for college housing.
A person who owns an apartment or other living space and rents it to others.
A contract between two parties by which one party gives a thing (e.g.; an apartment, a car) to the other party for a set amount of time in exchange for payment.
Abbreviation of London Interbank Offered Rate, the interest rate charged by global banks to each other for borrowing money.
- List Price
The price at which a home is listed for sale. Homes can sell for more than their list price, or less.
- Living Will
A written document that details how a person wants their medical care handled if they’ve lost the ability to communicate for themselves.
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- Loan Term
The length of time over which a loan gets repaid, usually in years.
In mortgage, the ratio of (the size of the loan) as compared to (the value of the home the loan is attached to). Expressed as a percentage.
- Low- and No-Down Payment
Mortgage loans for which a down payment of five percent or less is required.
- Make An Offer
When you tell a home seller that you’d like to buy their home, officially. Usually includes the price at which you’re willing to buy the home, and the date on which you’re willing to exchange keys.
- Master's Degree
A first-level academic degree for students who have completed graduate school.
- Medical Payments Coverage
A component of auto insurance coverage. Provides protection for ambulance rides, airlifts, and emergency medical care for a driver and its passengers.
An abbreviation for Multiple Listing Service. The system real estate brokers use to list and track homes for sale.
A loan used to purchase a home, including stand-alone homes, homes with up to 4 units, and condominiums and co-ops.
- Mortgage Calculator
A special calculator meant to simplify the math tied to owning a home.
- Mortgage Guidelines
A list of qualifications a person must satisfy in order to get mortgage-approved.
- Mortgage Lender
An interchangeable term used for person who helps you get your mortgage loan approved, and the company that the person works for.
- Mortgage Rate
The interest rate charged for a mortgage loan. Mortgage loans with lower interest rates cost less over time.
- Mortgage Rate Lock
A signed agreement that describes a mortgage lender commitment to honor a specific mortgage rate, at a specific cost, for a specific number of days.
- Mortgage-Backed Securities
Bonds that are backed by mortgages. Often abbreviated as MBS, mortgage-backed securities are the basis for conforming, FHA, VA, and USDA mortgage rates; and some non-conforming mortgage rates.
- Multi-Unit Home
A residential property with 2-units, 3-units, or 4-units.
- National Association of REALTORS
The national trade association for real estate agents. Members are known as REALTORS®. Often abbreviated as NAR.
- Net Tangible Benefit
The FHA test for whether an FHA Streamline Refinance benefits the homeowner, and can proceed to closing.
- No Annual Fee
Typically associated with credit cards. Denotes that consumers are not charged a fee for access to a product.
- Non-Conforming Loan
A mortgage loan which does not conform to the standards of Fannie Mae or Freddie Mac. Jumbo loans are a type of non-conforming loan.
- Non-Resident Permanent Alien
A non-U.S. citizen who is permitted to live in the United States on, at least, a temporary basis.
- Non-Warrantable Condominium
Condominiums with traits linked with higher default rates, including one entity owning more than 49% of all units; large percentages of units with dues in arrears; and, lawsuits involving the association.
- Offer Letter
A written job offer from an employer to a job candidate with salary and a start date.
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- Opportunity Cost
The cost of not doing something. Example: You earn $20 as a movie extra, but skip work to do it and work pays $100 per day. Your opportunity cost is $80.
An attempt to withdraw or spend more money than what’s in a bank account.
- Part-Time Job
A job requiring less than 30 hours per week, and which is usually marked by shifts and rotations.
- Perkins Loan
A fixed-rate student loan for undergraduate and graduate students with financial need, offered by the U.S. Department of Education.
- Personal Articles
Insurance for the items in your home including furniture, jewelry, and collections.
- Personal Liability Insurance
Insurance for the costs of injuries that guests sustain in your home, and damage guests may cause. Part of a homeowners insurance or renters insurance policy.
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- Personal Network
The people you know personally and professionally, who can help you with your career.
- Personal Property
Items that belong to you. Personal property is anything that can be moved into a home; and, moved out of a home.
- Personal Umbrella Insurance
Additional liability insurance. Designed to protect a person from major damage claims and lawsuits.
- Portfolio Loan
A mortgage loan held in a lender’s portfolio of investments. The opposite of a securitized loan.
Abbreviation for Preferred Provider Organization. A health insurance plan that gives you freedom of choice with your doctors, with access to physicians offering lower, pre-negotiated costs for services.
A document issued by a mortgage lender stating that a person is expected to be mortgage-approved, assuming no detrimental changes with their job, salary, or credit.
- Primary Mortgage Market Survey
Freddie Mac’s weekly mortgage rate survey of approximately 125 mortgage lenders. Commonly abbreviated as “PMMS”.
- Private Mortgage Insurance
An insurance policy for mortgage lenders that protects against loss on certain low- and no-downpayment mortgages.
- Private Student Loan
A student loan that’s not made by the U.S. Department of Education.
- Property Damage Liability
A component of auto insurance coverage. Provides protection against hit-and-run accidents, and other drivers carrying insufficient insurance.
An abbreviation of “Planned Urban Development”, which is a community of shared maintenance and services.
- Put Down
A jargon-like expression. Refers to the size of a person’s down payment on a home. Can be expressed in dollar terms, or percentage of a home’s purchase price.
- Quantitative Easing
A central bank policy to purchase securities on the open market, to increase demand and lower available interest rates.
3-month sections of the year, often abbreviated by “Q” followed by a number. January begins Q1; April begins Q2; July begins Q3; October begins Q4.
- Real Estate Agent
A licensed professional who represents home buyers and home sellers with the purchase and sale of homes.
- Real estate contracts
A written agreement between a home buyer and a home seller, including price and dates, which details how homeownership will be transferred.
- Real Estate Taxes
A tax bill linked to homeownership, due at least once per year, which may be collected by the city, the township, the local government, or each.
To replace your existing mortgage loan with a new mortgage loan, usually to save money.
- Rental Reimbursement Coverage
Optional coverage for auto insurance. Covers the cost of a rental car while your automobile is being repaired.
- Renters Insurance
Insurance which pays for damage to a home from accident or robbery. Available to renters only.
- Replacement Coverage
A method used by insurance companies to value your possessions. Equal to the cost of buying a similar product with similar features, at full retail price.
A stylized list of a person’s job qualifications and experience.
The point in a person’s life when they stop working completely.
- Revolving Credit
Credit that is immediately available as debts are paid down
- Roadside Assistance Coverage
Optional coverage for auto insurance. Provides tow services after a breakdown, locksmiths for when you’re locked out, and roadside help replacing a flat tire.
A regular payment for time and service made from an employer to an employee, typically every other week.
- Samsung Pay
A faster way to pay for something in a store. Hold a Samsung device over a sensor, and payment is made by credit card automatically.
A cash award made to a student for tuition and other costs of education.
The amount of time that’s passed since a real estate-related closing. Typically measured in months.
- Secured Credit Card
A credit card requiring a security deposit from the card holder, often used to establish a credit rating.
- Security Deposit
An upfront payment held in a special bank account that’s used to pay for damages to a thing, usually an apartment, while it’s being rented.
- Selective Service
A database of persons which makes one eligible to be drafted into the U.S. military, if needed
- Seller Concessions
When the seller of a home agrees to pay the home buyer’s closing costs, in part or in full. Sometimes, is accompanied by a home sale price increase.
- Shop Around
To compare competing offers between lenders, companies, or banks, in search of the best product for your needs.
- Side Hustle
Jargon for a “second job”, usually freelance work.
- Single Entity Coverage
A type of insurance coverage within a condo building. Covers common areas, and original fixtures and plumbing within individual condo units.
- Soft Credit Inquiry
An inquiry when you check your own credit, or when a creditor checks your credit to pre-approve you for an offer. Does not appear on credit reports and does not affect credit scores.
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- Stafford Loan
A student loan that is offered by the U.S. Department of Education to undergraduate and graduate school students.
A formal communication showing how much money is owed to a company, bank, or lender.
- Student Loan
A loan made to students, parents, or family members used to pay for education.
- Subsidized Student Loan
A student loan for which the U.S. governments pays all interest due on the loan while the student is studying, and for a small period afterward.
- Surviving Spouse
A person who was married to a deceased member of the military at the time of his or her death.
- Tappable Home Equity
Home equity that can be readily accessed via a cash-out refinance
- Tax Deduction
Expenses which can be used to lower the amount of your income taxed by the government
- Teaser Rate
The starting interest rate for a credit card, mortgage, or other loan that can change in the future, on a specific date.
A person who rents an apartment or other living space. Sometimes called a “renter”.
- Term Life Insurance
A life insurance policy that makes payment to people upon the death of the policyholder.
- Trade School
An educational institution that teaches skills related to a specific job. Also known as vocational school and technical school.
An agreement that gives a third party control over a person or household’s money and assets.
The cost of education.
A formal process by which a lender evaluates a borrower’s application for approval.
- Uninsured and Underinsured Motorist Coverage
A component of auto insurance coverage. Provides protection against hit-and-run accidents, and other drivers carrying insufficient insurance.
- Unsubsidized Student Loan
A student loan for which the student is responsible for paying all interest that is due.
- USDA Mortgage
A mortgage guaranteed by the U.S. Department of Agriculture (USDA). USDA loans are available in rural and less-dense suburban areas.
Public services used by homeowners and businesses, such as telephone, water, gas, and electric.
- VA Mortgage
A mortgage guaranteed by the Department of Veterans Affairs (VA). VA loans are available with 100% financing to members of the U.S. military.
- Variable Interest Rate Loan
A loan for which the interest rate can change over time.
- Wage Garnishment
When a judge requires that a portion of your paycheck be withheld each pay period, and paid to a person to whom you owe money. Continues until the debt in question has been paid-in-full.
- Warrantable Condominium
A condominium eligible for conventional mortgage financing via Fannie Mae or Freddie Mac.
A document which states how your possessions and property should be distributed upon your death. Also known as a Last Will and Testament.
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The return rate on an investment. Usually expressed as a percentage of the investment’s current value.
- Zero Interest Rate Policy
When a nation’s central bank lowers its borrowing rate to zero-percent. Usually accompanied other policies designed to stimulate an economy.
- Zero-Closing Cost Option
A mortgage option in which the lender pays the borrower’s closing costs using rebate, or reverse discount points.