Call Option
A provision of a note which allows the lender to
require repayment of the loan in full before the
end of the loan term. The option may be exercised
due to breach of the terms of the loan or at the
discretion of the lender.
Cap
A limit on how much an adjustable rate mortgage's
monthly payment or annual interest rate can
increase. A cap is meant to protect the borrower
from large increases and may be a payment cap, an
interest cap, a life-of-loan cap or periodic cap.
A payment cap is a limit on the monthly payment.
An interest cap is a limit on the amount of the
interest rate. A life-of-loan cap restricts the
amount the interest rate can increase over the
entire term of the loan. A periodic cap limits the
amount the interest rate can change each interest
rate adjustment date. For example, if your
per-period cap is 1% and your current rate is 7%,
then your newly adjusted rate must fall between 6%
and 8% regardless of actual changes in the index.
Cash Out
Any cash received when you get a new loan that is
larger than the remaining balance of your current
mortgage, based upon the equity you have already
built up in the house. The cash out amount is
calculated by subtracting the sum of the old loan
and fees from the new mortgage loan. For example,
if your existing loan is $100,000, you might
refinance it with a loan of $120,000. After you
pay off your current loan ($100,000) and any
loan-origination costs for the new loan (for
example $2,000 in points), you would be left with
$18,000 cash out. Cash-out loans may not be
available for all types of property.
Cashier's Check (or Bank Check)
A check whose payment is guaranteed because it was
paid for in advance and is drawn on the bank's
account instead of the customer's.
Ceiling
The maximum allowable interest rate of an
adjustable rate mortgage.
C.E.M.
Or Consolidation, Extension, and Modification of
existing note(s) into one document: the CEM
Agreement. In New York refinanced and purchase
money mortgages are often documented in this
manner to reduce the recording tax. Allowed only
on properties located in New York State. (See
Assignment)
Certificate of Eligibility
Document issued by the Veterans Administration to
qualified veterans which verifies a veteran's
eligibility for a VA guaranteed loan. Obtainable
through local VA office by submitting form DD-214
(Separation Paper) and VA form 1880 (request for
Certificate of Eligibility).
Certificate of Occupancy (CO)
Written authorization given by a local
municipality that allows a newly completed or
substantially completed structure to be inhabited;
not to be confused with "Notice of
Completion."
Certificate
of Reasonable Value (CRV)
A Veteran's Administration appraisal that
establishes the maximum VA mortgage loan amount
for a specified property.
Certificate of Title
Written opinion of the status of title to a
property, given by an attorney or title company.
This certificate does not offer the protection
given by title insurance.
Certificate of Veteran Status
FHA form filled out by the VA to establish a
borrower's eligibility for a FHA Vet loan.
Obtainable through local VA office by submitting
form DD 214 (Separation Paper) with form 26-8261a
(request for certificate of veteran status).
Chain of Title
The chronological order of conveyance of a
property from the original owner to the present
owner.
Closed-end Mortgage
A mortgage principal amount that is fixed and
cannot be increased during the life of the loan.
Closing (or Settlement)
The settlement or closing is the conclusion of
your real estate transaction. It includes the
delivery of your security instrument, signing of
your legal documents and the disbursement of the
funds necessary to the sale of your home or loan
transaction (refinance).
Closing Costs
Costs payable by either seller or buyer at the
time of settlement when the purchase of a property
is finalized or by borrower when a loan is
refinanced. They include expenses such as points,
taxes, title insurance, mortgage insurance and
attorneys' fees. You will receive more specific
information about types and amounts of closing
costs applicable to your transaction and the state
where your property is located when you apply for
a loan.
Closing Statement
Also referred to as the HUD1. The final statement
of costs incurred to close on a loan or to
purchase a home.
Cloud
A claim to the title of a property that, if valid,
would prevent a purchaser from obtaining a clear
title.
Co-borrower
One who is individually and jointly obligated to
repay a mortgage loan and may or may not share
ownership of the property with one or more
borrowers. See also: Co-signer
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.
Collection
The efforts used to bring a delinquent mortgage
current and to file the necessary notices to
proceed with foreclosure when necessary.
Co-maker
A person who signs a promissory note along with
the borrower. A co-maker's signature guarantees
that the loan will be repaid, because the borrower
and the co-maker are equally responsible for the
repayment. See endorser.
Commission
The fee charged by a broker or agent for
negotiating a real estate or loan transaction. A
commission is generally a percentage of the price
of the property or loan.
Commitment Fee
A fee charged when an agreement is reached between
a lender and a borrower for a loan on specific
terms and conditions. Rate and points may be
locked-in or may be "floating".
Commitment Letter
A formal offer by a lender stating the terms under
which it agrees to lend money to a homebuyer. Also
known as a "loan commitment."
Common Elements/Areas
Those portions of a building, land, and amenities
of a PUD, condo or co-op that are used by all unit
owners, who share in the common expenses of their
operation and maintenance. Common areas usually
include swimming pools, tennis courts, or other
recreational facilities, as well as common
corridors of buildings, parking lots, etc.
Comparable
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.
Condominium
A form of ownership where the dwelling units are
individually owned and homeowners share ownership
of common areas such as the grounds, the parking
facilities and the tennis courts.
Condominium Conversion
Changing the ownership of an existing building
(usually a rental project) to the condominium form
of ownership.
Conforming Loan
A loan that conforms to Federal National Mortgage
Association (FNMA) or Federal Home Loan Mortgage
Corporation (FHLMC) guidelines. The maximum
conforming loan amount is $227,150 for a one-unit
property.
Construction Loan
A short-term, interim loan for financing the cost
of construction. The lender makes payments to the
builder at periodic intervals as the work
progresses. Upon completion of the construction,
the some lenders will convert the loan to
permanent financing while other lenders will
require the borrower to pay the construction loan
in full. In this instance the borrower
usually can refinance the property.
Consumer Handbook on Adjustable Rate
Mortgages
A disclosure required by the federal government to
be given to any borrower applying for an
adjustable rate mortgage (ARM).
Consumer 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.
Contingency
A condition which must be satisfied before a
contract is legally binding.
Contract of Sale
The agreement between the buyer and seller on the
purchase price, terms, and conditions of a sale.
Conventional Loan
A mortgage loan that is not insured, guaranteed or
funded by the Veterans Administration (VA), the
Federal Housing Administration (FHA) or Rural
Economic Community Development (RECD) (formerly
Farmers Home Administration).
Conversion Clause
A provision in some ARMs that allows you to change
an ARM to a fixed-rate loan, usually after the
first adjustment period.
Conveyance
The document used to effect a transfer, such as a
deed, or mortgage.
Co-operative
A co-op is a form of ownership in which a
corporation or business entity holds title to a
property and grants the occupancy rights to
particular apartments or units to shareholders by
means leases or similar arrangements. A loan
granted for a co-op is collateralized by an
assignment of the proprietary lease and a pledge
of the shares of stock allocated to the unit.
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.
Co-signer
A person who agrees to assume a debt obligation if
the principal borrower defaults on the payments. A
co-signer is not on the security instrument and is
only responsible for the debt. See also: Co-borrower
Cost of Funds Index (COFI)
An index of the weighted-average interest rate
paid by savings institutions for sources of funds,
usually by members of the 11th Federal Home Loan
Bank District.
Covenant
A clause in a mortgage that obligates or restricts
the borrower and that, if violated, can result in
foreclosure.
Covenants
Rules and restrictions governing the use of
property.
Credit Bureau Company
A company that is engaged in the preparation of
reports that are used by credit grantors to
determine the credit and public records history of
an individual. The agency obtains data for these
reports from national repositories and other
sources (e.g., TRW, TransUnion, Equifax, and
public record data).
Credit Bureau Repository
An organization that compiles credit history data
directly from lenders and creditors to build
in-file credit reports for individuals; the main
repositories are TRW, TransUnion, & Equifax.
Credit Report
A report detailing the credit history of a
prospective borrower that's used to help determine
borrower credit worthiness.
