GLOSSARY

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

A

Accountant: a person whose profession is inspecting and auditing personal or commercial accounts.

Amortization: an accounting technique used to periodically lower the book value of a loan or intangible asset over a set period of time.

Annual percentage rate (APR): the annual rate of interest charged to borrowers and paid to investors.

Appraisal: a valuation of property, such as real estate, a business, collectible, or an antique, by the estimate of an authorized person.

Asset: property owned by a person or company, regarded as having value and available to meet debts, commitments, or legacies.

Assumable loan: a type of financing arrangement whereby an outstanding mortgage and its terms are transferred from the current owner to a buyer

B

Balloon loan: a type of loan that does not fully amortize over its term. Since it is not fully amortized, a balloon payment is required at the end of the term to repay the remaining principal balance of the loan.

Bonds: a fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental)

Bookkeeper: a person whose job is to keep records of the financial affairs of a business.

C

Capital gain: an increase in a capital asset's value. It is considered to be realized when you sell the asset. A capital gain may be short-term (one year or less) or long-term (more than one year) and must be claimed on income taxes.capital asset.

Capitalism: an economic system in which private individuals or businesses own capital goods. The production of goods and services is based on supply and demand in the general market—known as a market economy—rather than through central planning—known as a planned economy or command economy.

Cash: legal tender—currency or coins—that can be used to exchange goods, debt, or services. Sometimes it also includes the value of assets that can be easily converted into cash immediately, as reported by a company.

Cash flow: the net amount of cash and cash-equivalents being transferred into and out of a business. At the most fundamental level, a company's ability to create value for shareholders is determined by its ability to generate positive cash flows, or more specifically, maximize long-term free cash flow (FCF).

Certified public accountant (CPA): a designation earned by accounting professionals who pass a series of accounting exams and satisfy other experience requirements. The accounting industry is largely self-regulated, such as other industries like financial planning.

Closing: the final phase of mortgage loan processing where the property title passes from the seller to the buyer.

Closing agent: professionals who function chiefly for the buyer by conveying the selling interest from the buyer to the seller and ensuring the orderly transfer of the legal title from the seller to the buyer through the closing process.

Closing costs: the expenses, over and above the price of the property, that buyers and sellers normally incur to complete a real estate transaction.

Communism: a political and economic ideology that positions itself in opposition to liberal democracy and capitalism, advocating instead for a classless system in which the means of production are owned communally and private property is nonexistent or severely curtailed.

Contingency: a potential negative event that may occur in the future, such as an economic recession, natural disaster, fraudulent activity, or a terrorist attack.

Counter offer: A response to an offer to purchase a property that introduces new or different terms and conditions.

Credit report: An Assessment, provided by a local retail credit association, of an individual's ability to repay debt.

Currency: A generally accepted form of money, which is issued by a government and circulated within an economy. Used as a medium of exchange for goods and services, currency is the basis for trade.

D

Debit: an accounting entry that results in either an increase in assets or a decrease in liabilities on a company's balance sheet. In fundamental accounting, debits are balanced by credits, which operate in the exact opposite direction.

Debit Card: a payment card that deducts money directly from a consumer's checking account to pay for a purchase. Debit cards eliminate the need to carry cash or physical checks to make purchases directly from your savings.

Debt or debt service: an amount of money borrowed by one party from another.

Deferred maintenance: the practice of postponing maintenance activities such as repairs on both real property (i.e. infrastructure) and personal property (i.e. machinery) in order to save costs, meet budget funding levels, or realign available budget monies.

Deflation: a general decline in prices for goods and services, typically associated with a contraction in the supply of money and credit in the economy. During deflation, the purchasing power of currency rises over time.

Democracy: a system of government by the whole population or all the eligible members of a state, typically through elected representatives.

Dividend: is usually a cash payment from earnings that companies pay to their investors.

Dividend yield: the amount of money a company pays shareholders for owning a share of its stock divided by its current stock price. Mature companies are the most likely to pay dividends.

Down payment: the cash that a buyer is required to provide to qualify for a mortgage loan.

Due diligence: an investigation, audit, or review performed to confirm the facts of a matter under consideration.

E

Earned income: any income from a job or self-employment.

Equity: the ownership of a public company or an asset.

Escrow: a legal concept describing a financial instrument whereby an asset or escrow money is held by a third party on behalf of two other parties that are in the process of completing a transaction.

Estoppel certificate: a signed statement of facts that cannot later be contradicted by the signer. It is used in mortgage negotiations to establish facts and financial obligations, such as outstanding amounts due that can affect the settlement of a loan.

Eviction: the process by which a landlord may legally remove a tenant from their rental property. Eviction may occur when rent has not been paid, when the terms of the rental agreement have been breached or in certain other situations as allowable by law.

F

Fascism: an economic system in which the government controls the private entities that own the factors of production.

Financial statement: the report cards for businesses. They tell the story, in numbers, about the financial health of the business.

Financing terms: The lifespan assigned to an asset or a liability, over which the value of the asset/liability is expected to either grow or shrink, depending on its nature.

Fixed rate mortgage: a home loan that has a fixed interest rate for the entire term of the loan. This means the mortgage carries a constant interest rate from beginning to end.

Fixer-upper: A property that needs repairs and renovation.

Foreclosure: when a lender seeks to seize your property as collateral for failure to pay your mortgage on time.

For Sale by Owner (FSBO): when a property owner chooses to sell their property on their own without an agent or broker to facilitate the sale.

G

Gross income: the individual's total pay from his or her employer before taxes or other deductions. This includes income from all sources and is not limited to income received in cash; it also includes property or services received.

H

Hyperinflation: a period of inflation of 50% or more per month.

I

Inflation: a quantitative measure of the rate at which the average price level of a basket of selected goods and services in an economy increases over some period of time.

Interest: the charge for the privilege of borrowing money, typically expressed as annual percentage rate (APR).

J

K

L

Labor unions: an organization that represents the collective interests of employees. Labor unions help workers unite to negotiate with employers over wages, hours, benefits, and other working conditions.

Lease: an agreement that gives a renter a choice to purchase the rented property during or at the end of the rental period.

Leverage: an investment strategy of using borrowed money—specifically, the use of various financial instruments or borrowed capital—to increase the potential return of an investment.

Liability: something a person or company owes, usually a sum of money.

Loan servicing: the administrative aspects of a loan from the time the proceeds are dispersed to the borrower until the loan is paid off.

Loan-to-value ratio (LTV): an assessment of lending risk that financial institutions and other lenders examine before approving a mortgage. Typically, loan assessments with high LTV ratios are considered higher risk loans. Therefore, if the mortgage is approved, the loan has a higher interest rate.

M

Maturity: the date on which the principal amount of a note, draft, acceptance bond or other debt instrument becomes due.

Mortgage: a debt instrument, secured by the collateral of specified real estate property, that the borrower is obliged to pay back with a predetermined set of payments.

Mortgage broker: an intermediary who brings mortgage borrowers and mortgage lenders together, but who does not use their own funds to originate mortgages.

Mutual funds: a type of financial vehicle made up of a pool of money collected from many investors to invest in securities like stocks, bonds, money market instruments, and other assets.

N

Note (Promissory): a financial instrument that contains a written promise by one party (the note's issuer or maker) to pay another party (the note's payee) a definite sum of money, either on demand or at a specified future date

O

Operating expenses: an expense a business incurs through its normal business operations. Often abbreviated as OPEX, operating expenses include rent, equipment, inventory costs, marketing, payroll, insurance, step costs, and funds allocated for research and development.

Origination fees: an upfront fee charged by a lender to process a new loan application. The fee is compensation for executing the loan. Loan origination fees are quoted as a percentage of the total loan, and they are generally between 0.5% and 1% of a mortgage loan in the United States.

P

Passive income: earnings derived from a rental property, limited partnership, or other enterprise in which a person is not actively involved. As with active income, passive income is usually taxable. However, it is often treated differently by the Internal Revenue Service (IRS)

Point: a percentage of a number or a measurement of the change in a number.

Prepayment penalty: a clause in a mortgage contract stating that a penalty will be assessed if the borrower significantly pays down or pays off the mortgage before term, usually within the first five years of committing to the loan.

Price per square foot: the average revenue earned for every square foot of sales space.

Private mortgage insurance (PMI): a type of mortgage insurance a borrower might be required to buy as a condition of a conventional mortgage loan.

PITI: Principal, interest, taxes, insurance (PITI) are the sum components of a mortgage payment.

Q

R

Real estate: land along with any permanent improvements attached to the land, whether natural or man-made—including water, trees, minerals, buildings, homes, fences, and bridges.

Real estate purchase contract: a binding and legal contract between two parties that obligates a transaction between the two parties: the buyer and the seller.

Rent per square foot: The amount of rent you pay divided by the number of square foot. This allows you to compare similar rents of different properties.

S

Seller financing: a real estate agreement in which the seller handles the mortgage process instead of a financial institution. Instead of applying for a conventional bank mortgage, the buyer signs a mortgage with the seller.

Socialism: a political and economic theory of social organization which advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole.

Strategic default: a deliberate default by a borrower. Strategic defaults are commonly employed by mortgage holders of residential and commercial property who have analyzed the costs and benefits of defaulting rather than continuing to make payments and have found it more beneficial to default.

T

Tax advantages: any type of investment, financial account, or savings plan that is either exempt from taxation, tax-deferred, or that offers other types of tax benefits.

Term: The lifespan assigned to an asset or a liability, over which the value of the asset/liability is expected to either grow or shrink, depending on its nature. The period of time assigned as the lifespan of any investment.

Title deed: a signed legal document that transfers the title of an asset to a new holder, granting them the privilege of ownership. The deed is the vehicle for transferring a title and is not the title itself.

U

Underwriting: the process of analyzing a loan application to determine the amount of risk involved in making the loan; it includes a review of the potential borrower's credit history and a judgment of the property value.

V

Vacancy rate: the percentage of all available units in a rental property, such as a hotel or apartment complex, that are vacant or unoccupied at a particular time. A vacancy rate is the opposite of the occupancy rate, which is the percentage of units in a rental property that are occupied.

W

Wealth: the value of all the assets of worth owned by a person, community, company, or country

X

Y

Z

Zoning laws: municipal or local laws or regulations that dictate how real property can and cannot be used in certain geographic areas

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z