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Call option
A provision in the mortgage that gives the mortgagee the right to
call the mortgage due and payable at the end of a specified period for
whatever reason.
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.
Capital (1) Money used to create income, either as an
investment in a business or an income property. (2) The money or
property comprising the wealth owned or used by a person or business
enterprise. (3) The accumulated wealth of a person or business. (4) The
net worth of a business represented by the amount by which its assets
exceed liabilities.
Capital expenditure The cost of an improvement made to
extend the useful life of a property or to add to its value.
Capital improvement Any structure or component erected as a
permanent improvement to real property that adds to its value and useful
life.
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.
Certificate of deposit
A document written by a bank or other financial institution that is
evidence of a deposit, with the issuer’s promise to return the deposit
plus earnings at a specified interest rate within a specified time
period.
Certificate of deposit index An index that is used to
determine interest rate changes for certain ARM plans. It represents the
weekly average of secondary market interest rates on six-month
negotiable certificates of deposit. See adjustable-rate mortgage (ARM).
Certificate of Eligibility A document issued by the federal
government certifying a veteran’s eligibility for a Department of
Veterans Affairs (VA) mortgage.
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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.
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.
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.
Change frequency The frequency (in months) of payment
and/or interest rate changes in an adjustable-rate mortgage (ARM).
Chattel Another name for personal property.
Clear title A title that is free of liens or legal
questions as to ownership of the property.
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."
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.
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.
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Closing statement See HUD-1 statement.
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.
Coinsurance A sharing of insurance risk between the insurer
and the insured. Coinsurance depends on the relationship between the
amount of the policy and a specified percentage of the actual value of
the property insured at the time of the loss.
Coinsurance clause A provision in a hazard insurance policy
that states the amount of coverage that must be maintained -- as a
percentage of the total value of the property -- for the insured to
collect the full amount of a loss.
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 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."
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.
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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.
Common law An unwritten body of law based on general custom
in England and used to an extent in the United States.
Community Home Improvement Mortgage Loan®
An alternative financing option
that allows low- and moderate-income home buyers to obtain 95 percent
financing for the purchase and improvement of a home in need of modest
repairs. The repair work can account for as much as 30 percent of the
appraised value.
Community Land Trust Mortgage Loan An alternative financing
option that enables low- and moderate-income home buyers to purchase
housing that has been improved by a nonprofit Community Land Trust and
to lease the land on which the property stands.
Community property In some western and southwestern states,
a form of ownership under which property acquired during a marriage is
presumed to be owned jointly unless acquired as separate property of
either spouse.
Community Seconds®
An alternative financing option for
low- and moderate-income households under which an investor purchases a
first mortgage that has a subsidized second mortgage behind it. The
second mortgage may be issued by a state, county, or local housing
agency, foundation, or nonprofit organization. Payment on the second
mortgage is often deferred and carries a very low interest rate (or no
interest rate at all). Part of the debt may be forgiven incrementally
for each year the buyer remains in the home.
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.
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Compound interest Interest paid on the original principal
balance and on the accrued and unpaid interest.
Condemnation The determination that a building is not fit
for use or is dangerous and must be destroyed; the taking of private
property for a public purpose through an exercise of the right of
eminent domain.
Condominium A real estate project in which each unit owner
has title to a unit in a building, an undivided interest in the common
areas of the project, and sometimes the exclusive use of certain limited
common areas.
Condominium conversion Changing the ownership of an
existing building (usually a rental project) to the condominium form of
ownership.
Condominium hotel A condominium project that has rental or
registration desks, short-term occupancy, food and telephone services,
and daily cleaning services and that is operated as a commercial hotel
even though the units are individually owned.
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.
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 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.
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Contract An oral or written agreement to do or not to do a
certain thing.
Conventional mortgage A mortgage that is not insured or
guaranteed by the federal government. Contrast with government mortgage.
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.
Convertible ARM An adjustable-rate mortgage (ARM) that can
be converted to a fixed-rate mortgage under specified conditions.
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.
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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).
Covenant A clause in a mortgage that obligates or restricts
the borrower and that, if violated, can result in foreclosure.
Credit 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.
Creditor A person to whom money is owed.
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. See merged credit report.
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.
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