Glossary Letter: D

Due diligence is the comprehensive process of evaluating a borrower’s financial status, assets, liabilities, and creditworthiness before finalizing a loan or investment. It involves reviewing documents, verifying information, and assessing risks to ensure informed decision-making.  Due diligence is crucial for mitigating risk, identifying potential issues, and ensuring that the loan terms are appropriate for both… Continue reading Due Diligence

A down payment is an upfront payment made by a borrower when purchasing a property or securing a loan, typically expressed as a percentage of the total purchase price. It reduces the loan amount and demonstrates the borrower’s financial commitment.  It is important to note that the size of the down payment influences loan terms,… Continue reading Down Payment

Debt service refers to the total amount of money required to meet the obligations of interest and principal payments on a loan within a specified period. The components of debt service typically include regular payments of interest and principal according to the agreed terms of the loan agreement. Interest payments compensate the lender for providing… Continue reading Debt Service

Debt Consolidation refers to the process of combining multiple existing debts into a single, larger loan. This can be a beneficial strategy for borrowers seeking to simplify their finances and reduce their overall interest burden. The primary benefits of debt consolidation include potentially lower monthly payments, reduced interest rates, and a streamlined payment process. This… Continue reading Debt Consolidation

The Debt-to-Income Ratio (DTI) is a financial metric that compares an individual’s monthly debt payments to their gross monthly income. It serves as a crucial indicator of an individual’s financial health and their ability to manage additional debt. To calculate DTI, divide the total monthly debt payments (including mortgage/rent, credit card payments, car loans, etc.)… Continue reading Debt-to-Income Ratio (DTI)

Delinquency refers to a situation where a borrower has missed one or more than one scheduled loan payments. When a payment is missed, the account is considered delinquent the day after the due date. This period of non-payment can have varying consequences depending on the duration of the delinquency and the lender’s policies. A Loan… Continue reading Delinquency

A deferment period refers to a specified duration during which a borrower is allowed to temporarily postpone making payments on a loan without accruing penalties or affecting their credit standing. This period is agreed upon and outlined in the loan agreement or terms of the lending institution. The primary purpose is to provide borrowers with… Continue reading Deferment Period

A Deferred Payment Loan refers to a specific loan product with a built-in grace period at the beginning of the loan term. Unlike traditional loans where payments begin immediately, deferred payment loans offer an initial period (often a few months) where borrowers are not required to make regular payments. This allows borrowers to delay their… Continue reading Deferred Payment Loan

Default occurs after delinquency where the borrower is unable to make any payments even after the grace period. If the delinquency persists and the borrower fails to bring the account current, it eventually leads to default.  The grace period can vary depending on the loan agreement and local regulations but often ranges from 60 to… Continue reading Default

A Deed of Trust refers to a legal document used in some states instead of a traditional mortgage for financing real estate. It involves three parties: the borrower (trustor), the lender (beneficiary), and a neutral third party (trustee). The borrower transfers the legal title of the property to the trustee, who holds it as security… Continue reading Deed of Trust