Loan Glossary

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ADJUSTABLE RATE MORTGAGE (ARM) -- The interest can change periodically up or down. ARMs usually offer lower initial interest rates. Great for first time home buyers. Credit Union offers 1 year, 5 year, and 7 year ARMs.
APPRAISAL -- A report by a qualified person setting forth an opinion or estimate of value and any reservations or conditions. It is the process by which this estimate is obtained.

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BUSINESS LOAN/INVESTMENT LOAN -- A loan that is not for personal or household use. The credit union refers to business loans as residential investment loans secured by real estate having 1-4 residential units.

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CEILING -- Maximum amount an interest rate can be on a loan.
CLASSIC VEHICLE -- A vehicle that is considered a collector's item and at least 25 years old.
CLOSED-END LOAN -- Handled as an individual request with new application and review of credit-worthiness.
CO-APPLICANT (CO-BORROWER) -- Person who is jointly obligated on the promissory note and whose income is used along with the borrower's income to quality for the loan. The co-applicant benefits from the loan proceeds. 
CO-MAKER (CO-SIGNER) -- Person who only signs the note and is guaranteeing the debt of the maker. A co-maker's income is used separately from the applicant to qualify for the loan. A full credit analysis of the co-maker is obtained. The terms co-maker, co-signer, and guarantor are all used interchangeably. The co-maker does not benefit from the loan proceeds. 
CONSTANT MATURITY TREASURY (CMT) -- An index published by the Federal Reserve Board calculated from the average yield of a range of Treasury securities adjusted to constant maturities of various time periods. The CMT is the index we use weekly to base our ARM adjustment.
CONSUMER LOAN -- Any loan for personal, family or household use excluding real estate loans.
CONVENTIONAL MORTGAGE -- A mortgage loan made without government insurance or guarantee and conforms to accepted standards.
CREDIT CARD RATIO -- This is a ratio of credit card balances in relation to the credit card limits.  The higher the ratio the more indebted the applicant and the higher the lending risk.
CREDIT LIFE INSURANCE -- A protection plan that pays off members' loans, up to the policy maximum, if they die before the loan is paid off. The member pays the premium (currently $0.52 per thousand per month) based on the outstanding loan balance. Joint credit life insurance is also attainable through the credit union and the current premium is $0.85 per thousand.
CREDIT DISABILITY INSURANCE -- A protection plan that helps make loan payments to the credit union if the member becomes totally and continuously disabled by a covered sickness or accident. The member pays the premium (currently $1.76 per thousand per month) based on the outstanding loan balance. Thirty-day period after disability is the responsibility of the member.

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DEBT RATIO-- This is a ratio between monthly debt including housing expenses divided by monthly net income.  Our policy states this is not to exceed 60%.
DEED OF TRUST -- In some states, the document used in place of a mortgage. Deed of Trust is type of security instrument conveying title in trust to a third party covering a particular piece of property. It is used to secure the payment of a note. A conveyance of the title (land) to a trustee as collateral (security) for the payment of a debt with the condition that the trustee shall re-convey the title upon the payment of the debt, and with power of the trustee to sell the land and pay the debt in the event of a default on the part of the debtor.
DISPOSABLE INCOME -- The amount of monthly net income remaining after all monthly debt and housing expense payments have been deducted.  Disposable income will need to be sufficient enough to pay for food, clothes, utilities, gas, childcare expenses and all other monthly expenses.

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EQUITY -- In real estate, the difference between fair market value and current indebtedness, usually referring to the owner's interest.

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 FLOOR -- Least amount an interest rate can be on a loan.

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GRACE PERIOD -- When used with a credit card, grace period is the length of time that you are allowed to pay off the debt without incurring finance charges. Our VISA and MasterCard® products have 25 day grace periods that allow purchases to be paid off without being charged interest. Cash advances start accumulating interest from the day the advance is made.

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HAZARD INSURANCE -- A contract whereby an insurer, for a premium, undertakes to compensate the insured for loss on a specific property due to certain hazards, i.e. fire, wind or other natural disasters.
HOME EQUITY LINE OF CREDIT (HELOC) -- A revolving line of credit with a home used as collateral. It is usually a second mortgage, but can be a first in some cases. Credit Union bases the equity in a member's property by taking up to 90% of the appraised value less any first mortgage and the difference being the equity a member can borrow.
HOMEOWNER'S INSURANCE -- In addition to compensating the insured for loss due to natural disasters (including fire, wind, etc.), this policy also compensates the insured for loss of contents, personal liability, etc.

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INDEX -- What lenders tie their interest rate changes to. The Credit Union uses indices to set the mortgage rates weekly. The CMT (Constant Maturity Treasury Rate) is the index used for primary mortgages, construction, land and investment loans. The prime is what is used for the Home Equity Line of Credit.

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LINE OF CREDIT -- Open-ended loan that allows future advances based on a pre-approved limit.
LIFETIME CAP -- The limit percent on which an initial ARM can adjust to over the life of the loan. EX. Initial Rate - 6.0%; Life Cap - 6.0%; Rate will never be higher than 12.0%.
LOANLINER® -- A set of lending forms developed by CUNA Mutual for use in credit unions. DCCU uses the term as a “product” name for our open-end, unsecured line-of-credit.
LOAN VALUE -- The average amount of credit that may be obtained on vehicles sold at or near the average listed value in the designated region.
LOAN TO VALUE (LTV) -- The ratio of the loan amount divided by the property value.
LOAN SERVICE EXECUTIVE (LSE) – An employee who takes mortgage loan applications and starts the underwriting process and prepares closing documents.

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MARGIN -- A number used to indicate the change or difference between an index and an interest rate.
MASTERCARD® -- An unsecured open-end, line of credit allowing a cardholder to make purchases and get cash throughout the world.
MEMBER SERVICE EXECUTIVE (MSE) – An employee who processes consumer loan applications and closes the loans for members.
MORTGAGE -- A conveyance of an interest in real property given as security for the payment of a debt. A first mortgage has priority over all other mortgages as a lien on a property. A second (junior) mortgage is subsequent in priority to a first mortgage.
MSRP --Manufacturer's Suggested Retail Price (MSRP), or Sticker Price, is the "suggested" price of the vehicle and includes additional information about the vehicle such as accessories. You'll find this sticker posted on the window of the car at the dealership. MSRP is a suggested price only and has usually been marked up with dealer-installed options. You probably won't want to pay the MSRP and you definitely want to know dealer cost before committing to a price. MSRP is a suggested selling price. You are not obligated to pay it.

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NATIONAL AUTO DEALERS ASSOCIATION OFFICIAL USED CAR GUIDE (NADA) -- A guidebook listing average values of used cars, imports, trucks, motorcycles, RV's, etc. The information is based upon reports of actual transactions throughout each area for which a guide is published.

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PLUS (PARENT LOAN TO UNDERGRADUATE STUDENT) -- A loan not based on family income for post-secondary education. The parent/borrower starts repaying the debt within sixty days of receiving the funds. The federal government does not subsidize the interest. 
PAYMENT CAPS -- Caps are limits to the amount an interest rate can change on its Periodic Change Date.
PAYMENT FACTOR -- A number used to determine a minimum monthly payment on open-end credit. Example: $2.52 per $100 of an outstanding balance. $2.52 is the payment factor.
POINTS -- Percentage paid up-front on amount borrowed. Sometimes used in connection with “buying-down” an interest rate. Each point equals one (1) percent of the loan amount.
PRIME RATE -- What large banks charge their best corporate customers. The prime rate quoted in the Wall Street Journal is the prime rate posted by at least 75% of the nations 30 largest banks.
PROFESSIONAL LOAN EXECUTIVE (PLE) -- An employee who approves loans and processes mortgages.

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RETAIL VALUE -- The latest average highest value (sales price) based on actual sales reports for new and used car dealers through our region for which the NADA guide is designated.  A maximum Retail vehicle auto should be in flawless condition. All power equipment should be functional. The paint should match and have a high gloss finish. The carpet and seat upholstery should be clean and have minimal wear. The engine should start quickly and run smoothly. The tires should be like new with a spare and jack. The mileage should be significantly below the acceptable mileage range for the model year. 
RUN CAP (RC CODE) -- Maximum or minimum that rates can adjust based on term selected at the beginning of the loan.

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SECONDARY MARKET -- Where investors buy and lenders sell loans.
SECURED LOANS -- Loans secured by tangible property that the borrower can pledge as collateral that can be seized and sold by the credit union in the event of default by borrower.
STAFFORD LOAN -- Made to student/borrowers while in undergraduate school. Qualification is based on income for the student and parents (guardians). Loans can be either subsidized (interest paid) or unsubsidized by the federal government. 
STUDENT LOAN -- A loan available to qualified applicants with interest paid by the federal government (excluding PLUS) and guaranteed by the Commonwealth of Virginia. 

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TRADE-IN VALUE -- The latest average wholesale values based on auction reports and dealer wholesale reports throughout the region for which the guide is designated.

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UNSECURED LOANS -- Loans without any collateral and are based entirely on the character and capacity of the borrower to repay.
UNSECURED RATIO -- This is a ratio of the amount of unsecured balances in relation to the applicant's gross annual income. 

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VARIABLE RATE MORTGAGE -- A mortgage agreement that allows for adjustment of the interest rate in keeping with a fluctuating market and terms agreed upon in the note. 
VISA CREDIT CARD -- An unsecured open-end, line of credit allowing a cardholder to make purchases and get cash throughout the world.

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WALL STREET JOURNAL PRIME RATE -- The index the Credit Union uses to set the rate on Home Equity LOC.

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