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Mortgage Glossary

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There are currently 59 names in this directory beginning with the letter C.

Call Option
A clause in a mortgage agreement that allows the lender to demand full repayment of the mortgage balance under specific conditions, often before the loan’s maturity date. This is typically used as a protective measure for the lender.

A limit placed on the amount that an adjustable-rate mortgage’s interest rate or monthly payment can change. Caps protect borrowers from significant increases in interest rates. There are different types of caps, including periodic caps (limits on how much rates can change within a specific period) and lifetime caps (limits on how much rates can change over the life of the loan).

(1) Money used to generate income, whether invested in a business or income property. (2) The wealth owned or used by an individual or business. (3) The accumulated wealth of a person or business. (4) The net worth of a business represented by the excess of its assets over liabilities.

Capital Expenditure
The cost of an improvement made to increase the useful life or value of a property. Capital expenditures are typically made for lasting improvements, such as renovations, additions, or upgrades that enhance the property’s value over time.

Capital Improvement
A permanent addition or improvement to real property that increases its value and extends its useful life. This can refer to structures or components added to a property that enhance its overall value and utility.

Cash-out Refinance
A refinancing transaction where the new loan amount is greater than the balance of the existing mortgage, and the borrower receives the difference in cash. The borrower can use this extra cash for various purposes, such as home improvements, debt consolidation, or other financial needs.

Certificate of Deposit
A document issued by a financial institution that represents a deposit and specifies the interest rate and maturity date. It’s often used to save money over a fixed period and earn interest.

Certificate of Deposit Index
An index used to determine interest rate adjustments for some adjustable-rate mortgage (ARM) plans. It reflects the average interest rate of six-month certificates of deposit (CDs) and is a factor in calculating the new interest rate for the ARM.

Certificate of Eligibility
A document provided by the Department of Veterans Affairs (VA) that certifies a veteran’s eligibility for a VA mortgage loan. It’s required for veterans to apply for and obtain VA home loans.

Certificate of Reasonable Value (ARV)
A document issued by the Department of Veterans Affairs (VA) that determines the maximum value and loan amount for a VA-guaranteed mortgage. This ensures that the loan amount does not exceed the reasonable value of the property according to VA guidelines.

Certificate of Title
A document that verifies legal ownership of real estate property. It’s issued by a title company, abstract company, or attorney after conducting a title search and confirming the property’s legal status.

Chain of Title
A historical record of all documents that establish a property’s ownership. It includes a chronological list of documents, such as deeds, transfers, and encumbrances, that show the property’s title history from the original owner to the current owner.

Change Frequency
The interval (in months) at which adjustments can be made to the interest rate or payment amount in an adjustable-rate mortgage (ARM). This determines how often the ARM’s terms will change according to the prevailing interest rate index.

Another term for personal property, which refers to movable assets that are not permanently affixed to real property.

Clear Title
A title to a property that is free from any liens, encumbrances, or disputes that could challenge ownership. It signifies that the owner has clear and unambiguous legal ownership rights to the property.

A meeting where the sale of a property is finalized by the buyer signing mortgage documents and paying closing costs. Ownership of the property is transferred from the seller to the buyer at this meeting. Also known as “settlement.”

Closing Cost Item
A fee or cost that a homebuyer must pay at closing for a specific service, tax, or product. These individual costs contribute to the total closing costs, which include various expenses associated with transferring ownership of a property.

Closing Costs
Expenses incurred by both buyers and sellers during a property transaction, over and above the property’s price. Closing costs include fees like origination fees, attorney’s fees, taxes, escrow funds, and charges for title insurance and surveys. These costs vary by location and are typically outlined in the HUD-1 statement.

Closing Statement
Also known as the HUD-1 statement, it’s a document provided at closing that details all the financial aspects of a real estate transaction. It lists all the costs, fees, and charges associated with the sale, including the distribution of funds to various parties.

Cloud on Title
Any conditions discovered during a title search that negatively affect a property’s title, making it unclear or questionable. Clouds on title might include unresolved liens, competing claims, or other issues that need to be addressed before a clear title can be established.

A person who signs a promissory note along with the borrower, committing to repay the loan in case the borrower defaults. Both the borrower and the co-maker are equally responsible for repaying the loan. This arrangement offers an additional layer of security for the lender.

A sharing of insurance risk between the insurer and the insured. Coinsurance depends on the relationship between the policy amount and a specified percentage of the actual value of the insured property at the time of a loss. If the insured’s coverage is less than the required percentage, a penalty may apply to claims.

Coinsurance Clause
A provision in a hazard insurance policy that stipulates the minimum amount of coverage (as a percentage of property value) the insured must maintain to receive the full amount of a loss claim. If the coverage is below this percentage, the payout may be reduced proportionally, regardless of the total loss amount.

Property or assets pledged as security for a loan. In real estate, the property being financed is often used as collateral for a mortgage loan. If the borrower defaults, the lender can seize and sell the collateral to recover the outstanding debt.

The process of collecting overdue payments or delinquent accounts, often involving contacting the borrower to resolve the debt and bringing the loan current.

A fee or percentage of the sale price paid to a real estate agent as compensation for their services in facilitating a property sale.

Commitment Letter
A formal document provided by a lender outlining the terms under which it is willing to lend money to a borrower for a mortgage. This letter confirms the borrower’s eligibility for the loan and specifies key details, such as interest rate, loan amount, and duration. Also called a “loan commitment.”

Common Area Assessments
Fees charged to individual unit owners in condominium or planned unit development (PUD) projects to cover the costs of operating, maintaining, and repairing common areas shared by all residents. These areas might include facilities like gyms, pools, and parking lots.

Common Areas
Shared spaces in a condominium or cooperative property that are used by all residents. Common areas might include lobbies, hallways, elevators, fitness rooms, and recreational spaces.

Common Law
An unwritten body of law developed through court decisions, customs, and legal precedents. Common law principles are often used to interpret laws and make legal decisions, and they vary between jurisdictions.

Community Land Trust Mortgage Option
A financing approach that enables low- and moderate-income homebuyers to purchase improved housing from a nonprofit Community Land Trust. The property’s land is leased from the Trust, allowing buyers to affordably acquire homes while maintaining affordability for future buyers.

Community Seconds®
A financing method for low- and moderate-income households where a second mortgage is subsidized by an investor. This second mortgage is often issued by a nonprofit organization, and its payment may be deferred or carry a low interest rate. Some portion of the debt may be forgiven based on the buyer’s tenure.

Community Seconds® Mortgage
An affordable financing option that involves a second mortgage issued by a government agency, foundation, or nonprofit organization to provide additional down payment assistance to qualified homebuyers. This can help reduce the initial mortgage loan amount and improve affordability.

Short for “comparable properties,” referring to properties similar to the subject property being appraised. Comparables are used for valuation purposes to determine the fair market value by comparing the size, location, features, and recent sale prices of similar properties.

Compound Interest
Interest calculated on both the original principal balance and the accumulated unpaid interest. As interest accrues, it’s added to the principal, and future interest is then calculated based on this new total, resulting in exponential growth of the loan balance over time.

The legal process by which a government exercises its right of eminent domain to take private property for public use. This usually involves compensating the property owner at a fair market value. Condemnation may also refer to declaring a building unfit for use and requiring its destruction.

A type of real estate development in which individual units in a building or complex are individually owned by residents. Owners also share ownership and access to common areas, such as halls, elevators, and recreational facilities, through a homeowners’ association.

Condominium Conversion
The process of changing an existing property, often a rental building, into individual condominium units. This involves subdividing the property and converting rental agreements into individual ownership titles.

Condominium Hotel
A condominium project that functions like a hotel, offering short-term occupancy, rental or registration desks, daily cleaning services, and amenities such as dining and telephone services. Individual units are owned by separate owners, while common areas are shared.

Construction Loan
A temporary, short-term loan specifically designed to fund the construction or development of a property. The lender disburses funds in installments, often directly to the builder, based on project milestones and work completion.

A condition or requirement outlined in a contract that must be met before the contract becomes binding or effective. Common contingencies in real estate contracts include satisfactory home inspections, obtaining financing, or securing necessary permits.

An agreement, whether written or oral, between two or more parties outlining the terms, conditions, and obligations to be fulfilled. Contracts serve as legally binding documents once they are entered into by all involved parties.

Conventional Mortgage
A mortgage that is not insured or guaranteed by a government agency, such as the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA). These mortgages typically require higher down payments and have stricter qualification criteria.

Convertibility Clause
A provision in certain adjustable-rate mortgages (ARMs) that permits the borrower to convert the ARM into a fixed-rate mortgage during specific time periods. This gives borrowers the option to switch to a stable interest rate if market conditions change.

Convertible ARM
An adjustable-rate mortgage (ARM) that includes a provision allowing the borrower to convert the loan into a fixed-rate mortgage at specified times. This provides flexibility for borrowers to lock in a fixed interest rate if rates begin to rise.

Cooperative (Co-op)
A type of multiple ownership in which the residents of a multiunit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.

Cooperative Corporation
A business trust entity that holds title to a cooperative project and grants occupancy rights to particular apartments or units to shareholders through proprietary leases or similar arrangements.

Cooperative Mortgages
Mortgages related to a cooperative project. This usually refers to the multifamily mortgage covering the entire project but occasionally describes the share loans on the individual units.

Cooperative Project
A residential or mixed-use building wherein a corporation or trust holds title to the property and sells shares of stock representing the value of a single apartment unit to individuals who, in turn, receive a proprietary lease as evidence of title.

Corporate Relocation
Arrangements under which an employer moves an employee to another area as part of the employer’s normal course of business or under which it transfers a substantial part or all of its operations and employees to another area because it is relocating its headquarters or expanding its office capacity.

Cost of Funds Index (COFI)
An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It represents the weighted-average cost of savings, borrowings, and advances of the 11th District members of the Federal Home Loan Bank of San Francisco. See adjustable-rate mortgage (ARM).

A clause in a mortgage that obligates or restricts the borrower and that, if violated, can result in foreclosure.

An agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date.

Credit History
A record of an individual’s open and fully repaid debts. A credit history helps a lender to determine whether a potential borrower has a history of repaying debts in a timely manner.

Credit Life Insurance
A type of insurance often bought by mortgagors because it will pay off the mortgage debt if the mortgagor dies while the policy is in force.

Credit Report
A report of an individual’s credit history prepared by a credit bureau and used by a lender in determining a loan applicant’s creditworthiness.

Credit Reporting Agency
An organization that prepares reports that are used by lenders to determine a potential borrower’s credit history. The agency obtains data for these reports from a credit repository as well as from other sources.

Credit Repository
An organization that gathers, records, updates, and stores financial and public records information about the payment records of individuals who are being considered for credit.

A person to whom money is owed.