Glossary (C)

Terms commonly used in the real estate and mortgage marketplace.

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Cap

For an adjustable-rate mortgage (ARM), a limitation on the amount the interest rate or mortgage payments may increase or decrease. See also “Lifetime Payment Cap,” “Lifetime Rate Cap,” “Periodic Payment Cap,” and “Periodic Rate Cap.”

Capacity

Your ability to make your mortgage payments on time. This depends on your income and income stability (job history and security), your assets and savings, and the amount of your income each month that is left over after you’ve paid for your housing costs, debts and other obligations.

Cash-out Refinance

A refinance transaction in which the borrower receives additional funds over and above the amount needed to repay the existing mortgage, closing costs, points, and any subordinate liens.

Certificate of Deposit

A document issued 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 Eligibility

A document issued by the U.S. Department of Veterans Affairs (VA) certifying a veteran’s eligibility for a VA-guaranteed mortgage loan.

Chain of Title

The history of all of the documents that have transferred title to a parcel of real property, starting with the earliest existing document and ending with the most recent.

Change Orders

A change in the original construction plans ordered by the property owner or general contractor.

Clear Title

Ownership that is free of liens, defects, or other legal encumbrances.

Closing

The process of completing a financial transaction. For mortgage loans, the process of signing mortgage documents, disbursing funds, and, if applicable, transferring ownership of the property. In some jurisdictions, closing is referred to as “escrow,” a process by which a buyer and seller deliver legal documents to a third party who completes the transaction in accordance with their instructions. See also “Settlement.”

Closing Agent

The person or entity that coordinates the various closing activities, including the preparation and recordation of closing documents and the disbursement of funds. (May be referred to as an escrow agent or settlement agent in some jurisdictions.) Typically, the closing is conducted by title companies, escrow companies or attorneys.

Closing Costs

The upfront fees charged in connection with a mortgage loan transaction. Money paid by a buyer (and/or seller or other third party, if applicable) to effect the closing of a mortgage loan, generally including, but not limited to a loan origination fee, title examination and insurance, survey, attorney’s fee, and prepaid items, such as escrow deposits for taxes and insurance.

Closing Date

The date on which the sale of a property is to be finalized and a loan transaction completed. Often, a real estate sales professional coordinates the setting of this date with the buyer, the seller, the closing agent, and the lender.

Closing Statement

See “HUD-1 Settlement Statement.”

Co-borrower

Any borrower other than the first borrower whose name appears on the application and mortgage note, even when that person owns the property jointly with the first borrower and shares liability for the note.

Collateral

An asset that is pledged as security for a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan agreement. In the case of a mortgage, the collateral would be the house and real property.

Commission

The fee charged for services performed, usually based on a percentage of the price of the items sold (such as the fee a real estate agent earns on the sale of a house).

Commitment Letter

A binding offer from your lender that includes the amount of the mortgage, the interest rate, and repayment terms.

Common Areas

Those portions of a building, land, or improvements and amenities owned 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.

Comparables

An abbreviation for “comparable properties,” which are used as a comparison in determining the current value of a property that is being appraised.

Concession

Something given up or agreed to in negotiating the sale of a house. For example, the sellers may agree to help pay for closing costs.

Condominium

A unit in a multiunit building. The owner of a condominium unit owns the unit itself and has the right, along with other owners, to use the common areas but does not own the common elements such as the exterior walls, floors and ceilings or the structural systems outside of the unit; these are owned by the condominium association. There are usually condominium association fees for building maintenance, property upkeep, taxes and insurance on the common areas and reserves for improvements.

Construction Loan

A loan for financing the cost of construction or improvements to a property; the lender disburses payments to the builder at periodic intervals during construction.

Contingency

A condition that must be met before a contract is legally binding. For example, home purchasers often include a home inspection contingency; the sales contract is not binding unless and until the purchaser has the home inspected.

Conventional Mortgage

A mortgage loan that is not insured or guaranteed by the federal government or one of its agencies, such as the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA), or the Rural Housing Service (RHS). Contrast with “Government Mortgage.”

Conversion Option

A provision of some adjustable-rate mortgage (ARM) loans that allows the borrower to change the ARM to a fixed-rate mortgage at specified times after loan origination.

Convertible ARM

An adjustable-rate mortgage (ARM) that allows the borrower to convert the loan to a fixed-rate mortgage under specified conditions.

Cooperative (Co-op) Project

A project in which a corporation holds title to a residential property and sells shares to individual buyers, who then receive a proprietary lease as their title.

Cost of Funds Index (COFI)

An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) loans. It is based on the weighted monthly average cost of deposits, advances, and other borrowings of members of the Federal Home Loan Bank of San Francisco.

Counter-offer

An offer made in response to a previous offer. For example, after the buyer presents their first offer, the seller may make a counter-offer with a slightly higher sale price.

Credit

The ability of a person to borrow money, or buy goods by paying over time. Credit is extended based on a lender’s opinion of the person’s financial situation and reliability, among other factors.

Credit Bureau

A company that gathers information on consumers who use credit. These companies sell that information to lenders and other businesses in the form of a credit report.

Credit History

Information in the files of a credit bureau, primarily comprised of a list of individual consumer debts and a record of whether or not these debts were paid back on time or “as agreed.” Your credit history is called a credit report when provided by a credit bureau to a lender or other business.

Credit Life Insurance

A type of insurance that pays off a specific amount of debt or a specified credit account if the borrower dies while the policy is in force.

Credit Report

Information provided by a credit bureau that allows a lender or other business to examine your use of credit. It provides information on money that you’ve borrowed from credit institutions and your payment history.

Credit Score

A numerical value that ranks a borrower’s credit risk at a given point in time based on a statistical evaluation of information in the individual’s credit history that has been proven to be predictive of loan performance.

Creditor

A person who extends credit to whom you owe money.

Creditworthy

Your ability to qualify for credit and repay debts.