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C
call option
A provision in the mortgage that gives the mortgagee (the lender)
the right to call the mortgage due and payable at the end of a specified
period for whatever reason. top of
page
cap
A provision of an adjustable-rate mortgage (ARM) that limits how
much the interest rate or mortgage payments may increase or decrease.
See lifetime payment cap, lifetime rate cap, periodic payment cap,
and periodic rate cap. top of page
capital expenditure
The cost of an improvement made to extend the useful life of a property
or to add to its value.
top of page
capital improvement
Any structure or component erected as a permanent improvement to
real property that adds to its value and useful life. top
of page
cash-out refinance
A refinance transaction in which the amount of money received from
the new loan exceeds the total of the money needed to repay the
existing first mortgage, closing costs, points, and the amount required
to satisfy any outstanding subordinate mortgage liens. In other
words, a refinance transaction in which the borrower receives additional
cash that can be used for any purpose. top
of page
Certificate of Eligibility
A document issued by the federal government certifying a veteran's
eligibility for a Department of Veterans Affairs (VA) mortgage.
top of page
Certificate of Reasonable Value (CRV)
A document issued by the Department of Veterans Affairs (VA) that
establishes the maximum value and loan amount for a VA mortgage.
top of page
certificate of title
A statement provided by an abstract company, title company, or attorney
stating that the title to real estate is legally held by the current
owner. top of page
chain of title
The history of all of the documents that transfer title to a parcel
of real property, starting with the earliest existing document and
ending with the most recent. top of
page
change frequency
The frequency (in months) of payment and/or interest rate changes
in an adjustable-rate mortgage (ARM). top
of page
closing
A meeting at which a sale of a property is finalized by the buyer
signing the mortgage documents and paying closing costs. Also called
"settlement." At this meeting, ownership of the property
is transferred from the seller to the buyer.
top of page
closing cost item
A fee or amount that a home buyer must pay at closing for a single
service, tax, or product. Closing costs are made up of individual
closing cost items such as origination fees and attorney's fees.
Many closing cost items are included as numbered items on the HUD-1
statement. top of page
closing costs
Expenses (over and above the price of the property) incurred by
buyers and sellers in transferring ownership of a property. Closing
costs normally include an origination fee, an attorney's fee, taxes,
an amount placed in escrow, and charges for obtaining title insurance
and a survey. Closing costs percentage will vary according to the
area of the country; lenders or REALTORS® often provide estimates
of closing costs to prospective homebuyers. top
of page
cloud on title
Any conditions revealed by a title search that adversely affect
the title to real estate. Usually clouds on title cannot be removed
except by a quitclaim deed, release, or court action. top
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collateral
An asset (such as a car or a home) that guarantees the repayment
of a loan. The borrower risks losing the asset if the loan is not
repaid according to the terms of the loan contract. top
of page
commitment letter
A formal offer by a lender stating the terms under which it agrees
to lend money to a home buyer. Also known as a "loan commitment."
top of page
common area assessments
Levies against individual unit owners in a condominium or planned
unit development (PUD) project for additional capital to defray
homeowners' association costs and expenses and to repair, replace,
maintain, improve, or operate the common areas of the project. top
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common areas
Those portions of a building, land, and amenities owned (or managed)
by a planned unit development (PUD) or condominium project's homeowners'
association (or a cooperative project's cooperative corporation)
that are used by all of the unit owners, who share in the common
expenses of their operation and maintenance. Common areas include
swimming pools, tennis courts, and other recreational facilities,
as well as common corridors of buildings, parking areas, means of
ingress and egress, etc. top of page
common law
An unwritten body of law based on general custom in England and
used to an extent in the United States. top
of page
comparables
An abbreviation for "comparable properties"; used for
comparative purposes in the appraisal process. Comparables are properties
like the property under consideration; they have reasonably the
same size, location, and amenities and have recently been sold.
Comparables help the appraiser determine the approximate fair market
value of the subject property. top
of page
compound interest
Interest paid on the original principal balance and on the accrued
and unpaid interest. top of page
contingency
A condition that must be met before a contract is legally binding.
For example, home purchasers often include a contingency that specifies
that the contract is not binding until the purchaser obtains a satisfactory
home inspection report from a qualified home inspector.
top of page
contract
An oral or written agreement to do or not to do a certain thing.
top of page
conventional mortgage
A mortgage that is not insured or guaranteed by the federal government.
Contrast with government mortgage. top
of page
convertibility clause
A provision in some adjustable-rate mortgages (ARMs) that allows
the borrower to change the ARM to a fixed-rate mortgage at specified
timeframes after loan origination. top
of page
convertible ARM
An adjustable-rate mortgage (ARM) that can be converted to a fixed-rate
mortgage under specified conditions. top
of page
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. top of page
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.
top of page
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.
top of page
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. top
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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). top of page
covenant
A clause in a mortgage that obligates or restricts the borrower
and that, if violated, can result in foreclosure. top
of page
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.
top of page
credit reporting agency (or bureau)
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. top of page
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.
top of page
D
debt
An amount owed to another. See installment loan and revolving liability.
top of page
deed
The legal document conveying title to a property. top
of page
deed-in-lieu
A deed given by a mortgagor to the mortgagee to satisfy a debt and
avoid foreclosure. Also called a "voluntary conveyance."
top of page
deed of trust
The document used in some states instead of a mortgage; title is
conveyed to a trustee. top of page
default
Failure to make mortgage payments on a timely basis or to comply
with other requirements of a mortgage. top
of page
delinquency
Failure to make mortgage payments when mortgage payments are due.top
of page
deposit
A sum of money given to bind the sale of real estate, or a sum of
money given to ensure payment or an advance of funds in the processing
of a loan. See earnest money deposit.
top of page
depreciation
A decline in the value of property; the opposite of appreciation.top
of page
discount points
See point. top of page
dower
The rights of a widow in the property of her husband at his death.
top of page
due-on-sale provision
A provision in a mortgage that allows the lender to demand repayment
in full if the borrower sells the property that serves as security
for the mortgage. top of page
due-on-transfer provision
This terminology is usually used for second mortgages. See due-on-sale
provision. top of page
earnest money deposit
A deposit made by the potential home buyer to show that he or she
is serious about buying the house. top
of page
E
easement
A right of way giving persons other than the owner access to or
over a property. top of page
effective age
An appraiser's estimate of the physical condition of a building.
The actual age of a building may be shorter or longer than its effective
age. top of page
effective gross income
Normal annual income including overtime that is regular or guaranteed.
The income may be from more than one source. Salary is generally
the principal source, but other income may qualify if it is significant
and stable. top of page
eminent domain
The right of a government to take private property for public use
upon payment of its fair market value. Eminent domain is the basis
for condemnation proceedings. top
of page
Employer-assisted housing
A special housing initiative that offers several different ways
for employers to work with local lenders to develop plans to assist
their employees in purchasing homes. top
of page
encroachment
An improvement that intrudes illegally on another's property. top
of page
encumbrance
Anything that affects or limits the fee simple title to a property,
such as mortgages, leases, easements, or restrictions. top
of page
Equal Credit Opportunity Act (ECOA)
A federal law that requires lenders and other creditors to make
credit equally available without discrimination based on race, color,
religion, national origin, age, sex, marital status, or receipt
of income from public assistance programs. top
of page
equity
A homeowner's financial interest in a property. Equity is the difference
between the fair market value of the property and the amount still
owed on its mortgage. top of page
escrow
An item of value, money, or documents deposited with a third party
to be delivered upon the fulfillment of a condition. For example,
the deposit by a borrower with the lender of funds to pay taxes
and insurance premiums when they become due, or the deposit of funds
or documents with an attorney or escrow agent to be disbursed upon
the closing of a sale of real estate. top
of page
escrow account
The account in which a mortgage servicer holds the borrower's escrow
payments prior to paying property expenses. top
of page
escrow analysis
The periodic examination of escrow accounts to determine if current
monthly deposits will provide sufficient funds to pay taxes, insurance,
and other bills when due. top of page
escrow collections
Funds collected by the servicer and set aside in an escrow account
to pay the borrower's property taxes, mortgage insurance, and hazard
insurance. top of page
escrow disbursements
The use of escrow funds to pay real estate taxes, hazard insurance,
mortgage insurance, and other property expenses as they become due.
top of page
escrow payment
The portion of a mortgagor's monthly payment that is held by the
servicer to pay for taxes, hazard insurance, mortgage insurance,
lease payments, and other items as they become due. Known as "impounds"
or "reserves" in some states. top
of page
estate
The ownership interest of an individual in real property. The sum
total of all the real property and personal property owned by an
individual at time of death. top of
page
exclusive listing
A written contract that gives a licensed real estate agent the exclusive
right to sell a property for a specified time, but reserving the
owner's right to sell the property alone without the payment of
a commission. top of page
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