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Houston Mortgage > Glossary >
Home Equity > D 1-10
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Debt
Money one person or firm owes to another person or firm.
Debt consolidation
The replacement of multiple loans with a single loan, often with a lower monthly payment and a longer repayment period. It's also called a consolidation loan.
Debt-to-income ratio
The percentage of before-tax earnings that are spent to pay off loans for obligations such as auto loans, student loans and credit card balances. Lenders look at two ratios. The front-end ratio is the percentage of monthly before-tax earnings that are spent on house payments (including principal, interest, taxes and insurance). In the back-end ratio, the borrower''s other debts are factored in.
Debtor
Technically, a person who has filed a petition for relief under the bankruptcy laws. More generally, anyone who owes.
Deduction
A tax deduction is an amount that the IRS allows you to subtract from your income before computing your income tax. If you have taxable income of $30,000 and deductions of $3,000, then you would figure how much tax you owe on the difference -- $27,000. People may take a standard deduction on federal income taxes, an amount established each year by the IRS for each filing status. Or, if they have a greater amount of deductions than the standard amount, they can deduct them by itemizing expenses on Schedule A. Typical itemized deductions include mortgage interest, some loan points, property taxes and state income taxes. Some other items -- such as alimony payments, moving expenses, deductible IRA and Keogh contributions -- may be deducted directly on the long Form 1040.
Deed
A document that provides title to property and is filed with a country recorder.
Deed of trust
A legal agreement that allows the lender to ask a title or escrow company to begin foreclosure proceedings on a property if the borrower stops paying the loan.
Default
1. The condition that occurs when a consumer fails to fulfill the obligations set out in a loan or lease. 2. A designation on a credit report that indicates a person has not paid a debt that was owed. Accounts usually are listed as being in default after several reports of delinquency. Defaults are a serious negative item on a credit report.
Deposit
Money given by a buyer when making a formal offer to bind the sale. Also called earnest money. It is also the term used for money placed in a bank or other financial institute.
Depreciation
The gradual loss of value of a building or other property because of age or natural wear. Automobiles in particular depreciate steeply in their first few years. In taxes, this is the deduction you are allowed for the wearing away and expensing over time of such items as office equipment, vehicles, buildings and furniture. For tax purposes, the IRS determines the amount of time such material is expected to last, and you depreciate, or spread the cost of, the asset over its estimated useful life rather than deducting the entire cost in the year you got it.
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