Glossary of Terms

Following are mortgage and real estate related terms and definitions you may find helpful.

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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 ARM limiting how much the interest rate or mortgage payments may increase.

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.

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: A loan transaction in which the borrower receives funds at the time of closing.

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.

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 Eligibility (COE): A document issued by the federal government certifying a veteran’s eligibility for a Department of Veterans Affairs (VA) mortgage.

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 certificate issued by a title company or a written opinion rendered by an attorney that the seller has good marketable and insurable title to the property, which he is offering for sale. A certificate of title offers no protection against any hidden defects in the title, which an examination of the records could not reveal. The issuer of a certificate of title is liable only for damages due to negligence. The protection offered a homeowner under a certificate of title is not as great as that offered in a title insurance policy.

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.

Claim: An amount requested of an insurer, by a policyholder or a claimant, for an insured loss.

Clear title: A title that is free of liens or legal questions as to ownership of the property.

Closing (Closing Date): The completion of the real estate transaction between buyer and seller. The buyer signs the mortgage documents and the closing costs are paid. Also known as the settlement date.

Closing Costs: Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Also called "settlement costs."

Closing Agent: A person who coordinates closing-related activities, such as recording the closing documents and disbursing funds.

Closing Costs: The costs to complete the real estate transaction. These costs are in addition to the price of the home and are paid at closing. They include points, taxes, title insurance, financing costs, items that must be prepaid or escrowed and other costs. Ask your lender for a complete list of closing cost items.

Closing cost item: A fee or amount that a homebuyer must pay at closing for a single service, tax, or product.

Cloud (On Title): An outstanding claim or encumbrance, which adversely affects the marketability of title.

Co-Borrower: An additional borrower on a loan. A co-borrower's obligation on a loan are the same as all other borrowers.

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: Property which is used as security for a debt. In the case of a mortgage, the collateral would be the house and property.

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.

Commission: Money paid to a real estate agent or broker by the seller as compensation for finding a buyer and completing the sale.

Commitment Letter: A letter from your lender stating the amount of the mortgage, the number of years to repay the mortgage (the term), the interest rate, the loan origination fee, the annual percentage rate and the monthly charges.

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.

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 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.

Comparables: An abbreviation for comparable properties used for comparative purposes in the appraisal process; facilities of reasonably the same size and location with similar amenities; properties which have been recently sold, which have characteristics similar to property under consideration, thereby indicating the approximate fair market value of the subject property.

Compound interest: Interest paid on the original principal balance and on the accrued and unpaid interest.

Condemnation: The taking of private property for public use by a government unit, against the will of the owner, but with payment of just compensation under the government's power of eminent domain. Condemnation may also be a determination by a governmental agency that a particular building is unsafe or unfit for use.

Condominium: Individual ownership of a dwelling unit and an individual interest in the common areas and facilities, which serve the multi-unit project.

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.

Concession: Something given up or agreed to in negotiating the sale of the 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.

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 loan for funding the cost of construction. The lender advances funds to the builder 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 plan for something that may occur but is not likely. For example, your offer may be contingent on the home passing a home inspection. It the home does not pass inspection, you're protected.

Contract: An oral or written agreement to do or not to do a certain thing.

Contractor: In the construction industry, a contractor is one who contracts to erect buildings or portions of them. There are also contractors for each phase of construction: heating, electrical, plumbing, air conditioning, road building, bridge and dam erection, and others.

Conventional Mortgage: Any mortgage that is not insured or guaranteed by the federal government.

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 time.

Convertible Arm: An adjustable-rate mortgage 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 Housing: An apartment building or a group of dwellings owned by a corporation, the stockholders of which are the residents of the dwellings. It is operated for their benefit by their elected board of directors. In a cooperative, the corporation or association owns title to the real estate. A resident purchases stock in the corporation, which entitles him to occupy a unit in the building or property owned by the cooperative. While the resident does not own his unit, he has an absolute right to occupy his unit for as long as he owns the stock.

Cooperative mortgages: Mortgages related to a cooperative project.

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.

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.

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

Coverage: The amount of protection, usually expressed in a percentage of the total claim amount, an insured receives under a certificate.

Credit: The ability of a person to borrow money, or buy good by paying over time. Credit is extended based on a lender's good opinion of the person's financial situation and reliability.

Credit bureau: A company that gathers information on consumers who use credit. These companies sell that information to credit lenders in the form of a credit report.

Credit history: A record of credit use 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." Credit institutions have created a detailed document of your credit history called a credit report.

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 document used by the credit industry to examine your use of credit. It provides information on money that you've borrowed from credit institutions and your payment history.

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.

Credit Score: A computer-generated number that summarizes your credit profile and predicts the likelihood that you'll repay future debts.

Creditworthy: Your ability to qualify for credit and repay debts.

Cure: A loan that is removed from a delinquency status with no loss to the insurer.

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