We hope this Glossary of Mortgage and Real Estate Terms helps you understand the home buying and financing process. Should you have any further questions, please do not hesitate to contact your Loan Officer for answers.
Additional Terms: # A B C D E F G H I J K L M N O P Q R S T U V W XYZ
C - Terms
Cap: A limit placed on payments, interest rates and/or the balance of a loan. Caps can limit increases by either a dollar amount or a percentage.
Capital Gains: A gain on the sale of a capital asset. For example, a property purchase for $250,000 is sold two years later for $275,000 and therefore has a $25,000 capital gain.
Capital Loss: A loss on the sale of a capital asset.
Carryover Basis: In a 1031 tax deferred exchange, the adjusted tax basis of the property surrendered that is used to determine the tax basis of the property acquired.
Cash Out Refinance: A refinance where a property equity is tapped for cash by refinancing more than the current liens.
Caveat Emptor: "Let the Buyer Beware."
Certificate of Eligibility: Issued by the Veterans Administration to those who qualify for a VA loan.
Certificate of Insurance: A document issued by an insurance company to verify the coverage.
Certificate of Occupancy: A legal document issued by a local government to a builder permitting a structure to be occupied as it meets public health and building codes.
Certificate of Title: A document, which assures the buyer that the person selling the property is indeed the legal owner of the property, and that no one else has any legal claim to the property other then those know such as a current mortgage. This certificate does not protect against loss if a hidden claim emerges after purchase of a property - only a title insurance policy can do that.
Chain of Title: A history of conveyances and encumbrances affecting the title of a property.
Chattel: Personal property.
Clear Title: A marketable title free of disputed interests.
Closing (Loan Closing): The act that brings a loan into legal existence, including the signing of all loan documents, their delivery to the appropriate parties, the disbursing of the loan funds.
Closing Costs: Financing costs, in addition to the price of the property itself, that are due at closing. These costs normally include, but are not limited to, origination fees, discount points (see points), attorney's fees, costs for title insurance, surveys, recording documents, and prepayments of real estate taxes and insurance premiums held by the lender. Sometimes the seller will help the borrower pay some of these costs. This is called "Seller paid closing costs."
Closing Statement: A statement of the funds received and spent at the closing of a real estate sale. The closing statement is furnished by the real estate closing agent to the buyer and seller separately. The standardized federal form, called a HUD-1, is used in most residential transactions.
Cloud on Title: An outstanding claim/lien or restriction on the property that, if valid, affects the owner's clear ownership rights to the property. A cloud can be removed from the title by a court action, a release or a deed.
CMO: Abbreviation for Collateral Mortgage Obligation. A multi-class, mortgage-backed security collateralized by loans that are typically residential or multi-family loans.
Co-borrower: A party who signs the mortgage note along with the borrower, is also on the title, and the obligation to pay for, the property with the borrower. Also called "co-mortgagor.”
COFI: Abbreviation of 11th District Monthly Weighted Average Cost of Funds Index published by The Federal Home Loan Bank of San Francisco. COFI is not an interest rate, but an index used in COFI adjustable rate mortgages to calculate the fully indexed interest rate of the loan.
Collateral: Property pledged as security for a debt. For example, real estate securing a mortgage. Collateral can be repossessed if the loan is not repaid.
Collateral Mortgage Obligation (CMO): A multi-class, mortgage-backed security collateralized by loans that are typically residential or multi-family loans.
Commission: In real estate, an agent's compensation (fee) for negotiating a real estate or loan transaction, often expressed as a percentage of the sales price or mortgage amount.
Commitment Letter: An agreement between a lender and a borrower to loan money at a future date subject to compliance with stated conditions. (See Conditional Commitment.)
Commitment Fee: A sum of money paid by the seller of mortgages to the investor in return for the investor's commitment to purchase a package of loans at some future date. This can be a non-refundable fee or it can be in the form of a refundable fee to be repaid to the seller upon fulfillment of the commitment.
Common Areas: Areas of a property that are used by all owners or tenants in a building or complex.
Co-mortgagor: A party who signs the mortgage note along with the borrower, and who shares the title and the obligation to pay for, the property with the borrower. Also called the Co-borrower.
Comparable: A property that is similar in physical composition, location and value to a property being appraised. Sometimes called a “comp”.
Competent Parties: Persons legally capable of entering into a contract. For example, they must be of legal age; not insane; drunk; or on drugs at the time they sign a contract.
Compliance Inspection Report: A report prepared by a compliance inspector for a mortgage lender. The report states if construction or repair work on a property meets the terms and conditions of a previous inspection.
Condemnation: The process by which private property is taken for public use without consent of the owner, but upon the award or payment of compensation.
Conditional Commitment: Indicates the satisfactory completion of technical processing for Department of Housing and Urban Development (HUD) or Federal Housing Administration (FHA) mortgage insurance. The Commitment involves the estimated cost of the project, the "as is" value of the site, the detailed estimate of the operating expenses and taxes, the supportable costs, the financial and credit capacity of the sponsors, financial requirements and mortgage amounts.
Conditional Offer: An offer subject to one or more requirements that need to be satisfied before the purchaser is obligated to buy. For example, a home inspection contingency.
Conditional Sales Contract: A contract for the sale of a property in which transfer of title to the buyer is contingent on fulfillment of certain conditions/contingencies.
Condominium: A form of ownership of real property. The purchaser receives title to a particular unit and a proportional interest in certain common areas. A condominium generally defines each unit as a separately owned space limited to the interior surfaces of the perimeter walls, floors, and ceilings. Title to the common areas is in terms of percentage.
Conduit: A mortgage market intermediary that consistently buys mortgage loans from retail originators on a flow or bulk basis. A conduit will repackage these loans, typically into security form, and then sell the security to raise cash for additional purchases.
Consideration: Anything of value given to induce enter into a contract.
Construction Loan: A short-term interim loan for financing the cost of construction of real property. Payments are made to the builder at periodic intervals as the construction progresses,
Construction Loan Agreement: A written agreement between a lender and/or a borrower and a builder in which the specific terms and conditions of construction and/or the construction loan, including the schedule of payments, are spelled out.
Construction Loan Draw: The periodic/partial disbursement of the construction loan, based on the schedule of payments in the loan agreement.
Consummation: The completion of a thing. To finish by completing what was intended. Consummation of a loan means that the loan has been closed or made.
Contiguous: Actually touching. Properties that are contiguous have a common boundary.
Contingency Clause: A condition to a contact or agreement. Normal contingency clauses in real estate are mortgage contingencies, home inspection, pest inspection, etc.
Contract: An agreement between competent parties to do or not do something. A valid real estate contract has: an offer; an acceptance; competent parties; consideration; legal purposes; written documentation; description of the property; signatures by the principals or their attorney-in-fact.
Contractor: A person or company who agrees to furnish materials and/or labor to do work for an agreed-upon price.
Conventional Loan: A mortgage loan that conforms to Fannie Mae/Freddie Mac stabdards for purchase on the Secondary Mortgage Market. These loans are not insured by the Federal Housing Administration (FHA) or guaranteed by the Veterans Administration (VA) or Farmers Home Administration (FmHA). No governmental agency approval is required of the borrower or property. It is called "conventional" because it conforms to accepted standards, modified within legal bounds by mutual consent of the borrower and the lender. Also called a conforming residential mortgage as it "conforms" to these standards..
Conversion: Changing a property to a different use such as from rental apartments into condominiums.
Convey: The act of transferring title to real property from one party to another.
Conveyance: In real property law, a transfer of legal title to land. Also called the Closing.
Cooperative (Co-Op): A form of multiple ownership of real estate in which a corporation or business trust entity holds title to a property and grants the occupancy rights to particular apartments or units to shareholders by means of proprietary leases or similar arrangements. Versus buying a unit in a condominium, a Buyer would purchase shares in the corporation that grant the Buyer rights to a certain unit.
Corporate Bond: An interest-bearing certificate of indebtedness.
Correspondent: See Mortgage Loan Correspondent.
COSI: Abbreviation for the Cost of Savings Index. This is not an interest rate, but an index used to calculate the fully indexed rate of a COSI adjustable mortgage. COSI is the only know adjustable index that is not computed by a third party (someone other then the lender), but is computed by Golden West Financial Corporation, the parent company of World Savings. COSI is only used by World Savings for use in their mortgages.
Co-Signer: A party who signs the mortgage note along with the borrower, but who does not own or have any interest in the title to the property.
Cost Approach: In an appraisal, a method of establishing the market value of a property by considering how much the subject property would cost if it were to be built today.
Co-Tenancy: Any of a number of forms of multiple ownership to real estate such as Tenancy in Common or Joint Tenancy.
Counter Offer: A rejection of an offer to buy or sell with a simultaneous substitute offer.
Coupon Rate: The annual interest rate shown on the face of a mortgage note.
Covenant: Generally, any written agreement. Most commonly in real estate, items set forth in a deed by the grantor or implied by the law.
Creditor:A person or company to whom a debt is owed by another person who is the “debtor”.
Credit Report: A document completed by a credit-reporting agency providing information about the buyer's credit cards, previous mortgage history, bank loans and public records dealing with financial matters.
Credit Score: A number based on a formula to sum up an individuals credit history. Commonly called a "FICO" score.
Cul-de-sac: A dead-end street with a turning circle at the end.
Cushion: A small excess amount of funds which most lenders require be kept in an escrow account.
