personal finace

principal

amount borrowed when getting a loan

interest

the price paid for the use of borrowed money

Annual percentage rate

What does APR stand for?

credit card

a substitute for cash

credit

ability of the consumer to acquire goods or services prior to payment with the faith that payment will be made in the future

collateral

valuable assets that a borrower pledges as security for a loan

secured loan

loan that is backed by collateral or assets you own

unsecured loan

loan that doesn't require or have any collateral

creditor

individuals or entities that have lent money to another individual or entity

single payment credit

the borrower is supposed to pay the principal and interest at one time

installment credit

loan that offers a borrow a fixed amount of money over a specific period of time; (ex. mortgage)

revolving credit

open ended credit account (ex. credit card)

pre qualified

a lender has reviewed your financial situation and determined that you meet at least some of their requirements to be approved for a loan

Private Mortgage Insurance

PMI

PMI

extra expense that conventional mortgage holders have to pay with a down payment of less than 20%; protects the lender

down payment

cash paid upfront in a financial transaction

grace period

time you dont have to pay (1 month)

minimum payment

payment that you have to pay in order to not be charged a late fee

fixed - payments stay the same throughout the term of the loan

variable - payments change throughout the loan

fixed v variable payments

loan made by the government to help people with less money to buy a home -- more accessible to people with less money, property requirements (not just any house)

What is an FHA Loan?

any loan not insured or guaranteed by the government -- accessible to most homebuyers have more flexibile terms

what is a conventional loan + advantages/disadvantages

verterans loan -- no down payment, have to meet requirements (veteran, actual house)

what is a VA loan + advantages/disadvantages

mortgage interest rate stays the same throughout the whole loan -- easy to budget for good for long-term homeowners

what is a Fixed Rate Mortgage + advantages/disadvantages

interest rates fluctuate, fixed for a period of time but then rate increases; can be risky - complicated rulesinterest rates fluctuate, fixed for a period of time but then rate increases; can be risky - complicated rules, payments can go way up

what is an adjustable rate mortgage + advantages/disadvantages

mortgage offered to rural property owners; can have a big loan, low down payments, but not all properties qualify

what is a USDA Loan + advantages/disadvantages

big loan to finance expensive properties; can have a big loan, with low down payments but there is higher interest

what is a Jumbo Loan + advantages/disadvantages

high interest if you have more than you can afford on it; high fees if missed payments, can be easy to put too much on in 'emergencies'

danger of credit cards

character - credit score
capacity - how much you can afford
capital - things you own that can go towards upfront payment
collateral - financial assets supporting loan
conditions - economic situation that impacts loans

5 C's of Creditworthiness