Call Option
A loan feature that allows the lender to require repayment of the loan in full before the term of the loan is up.
Cap
The limit on how much an interest rate or monthly payment can change, either at each adjustment or over the life of the mortgage.
Cash Out
A refinance for more than the balance of the original mortgage so that the excess money taken out reduces the borrower’s equity built up in the house property.
Cashier’s Check (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.
CC&R’s
Covenants, conditions and restrictions. A document that controls the use, requirements and restrictions of a property.
Ceiling
The maximum allowable interest rate of an adjustable rate mortgage.
Certificate of Eligibility
Document issued by the Veterans Administration to qualified veterans which entitles then to VA-guaranteed loans. Obtainable through local VA offices by submitting for DD-214 (Separation Paper) and VA form 1880 (Request for Certificate of Eligibility).
Certificate of Occupancy
Document issued by local government agency stating that a property meets the requirements of health and building codes.
Certificate of Reasonable Value (CRV)
A document that establishes the maximum value and loan amount for a VA guaranteed mortgage.
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
Document given to veterans or reservists who have served 90 days of continuous active duty (including training time) which enables them to obtain lower down payments on certain FHA-insured loans. Obtainable through local VA offices by submitting for DD-214 (Separation Paper) and form 26-8261a (Request for Certificate of Veteran Status).
Certified Check
A check drawn on the issuer’s account for funds that have been segregated by the bank, thus guaranteeing sufficient funds for payment.
Chain of Title
The chronological order of conveyance of a property from the original owner to the present owner.
Clear Title
A marketable title, free of clouds and disputes.
Closing (Settlement)
Meeting between the buyer, seller and lender or their agents at which property and funds legally change hands.
Closing Costs
Fees incurred in a real estate or mortgage transaction and paid by the borrower and/or seller during the closing of the mortgage loan. These typically include a loan origination fee, discount points, attorney’s fees, title insurance, appraisal, survey and any items which must be pre-paid, such as taxes and insurance escrow payments. The costs of closing are usually 2-6% of the mortgage amount.
Closing Statement
The financial disclosure statement that accounts for all of the funds received and expected at the closing, including deposits for taxes, hazard insurance, and mortgage insurance.
Cloud on Title
An outstanding claim or encumbrance that, if valid, would affect or impair the owner’s title.
COFI
See Cost of Funds Index.
Collateral
Assets that back a mortgage loan (real property in the case of a mortgage loan).
Commission
Money paid to a real estate agent or broker by the seller (usually 6-7% of the sale price of the house).
Condominium
A form of real estate ownership where the owner receives title to a particular unit and has a proportionate interest in certain common areas. The unit itself is generally a separately owned space whose interior surfaces (walls, floors and ceilings) serve as its boundaries.
Conforming Loan
A mortgage loan meeting the requirements set down by Fannie Mae and Freddie Mac including, most importantly, the requirement that the original loan balance not exceed specified limits under the maximum amount of loans FNMA and FHLMC are legally allowed to buy (currently $240,000 in 1999 for loans secured by a one unit property in most areas).
Construction Loan
A short-term interim loan to fund the construction of buildings or homes, which usually advances to money to the builder in installments as work progresses. After completion, a permanent loan is used to pay off the construction loan.
Contingency
A condition that must be satisfied before a contract is binding. For instance, a sales agreement may be contingent upon the buyer obtaining financing.
Contract of Sale
The agreement between the buyer and seller on the purchase price, terms and conditions of a sale.
Conventional Loan
A mortgage not insured by the FHA or guaranteed by the VA.
Conversion Clause
A provision in some ARMS that enables you to change an ARM to a fixed-rate loan, usually after the first adjustment period. The new fixed rate is generally set at the prevailing interest rate for fixed-rate mortgages. This conversion feature may cost extra.
Convertible ARMs
ARMs with the option of conversion to a fixed loan during a given period of time (see “Conversion Clause”).
Conveyance
The transfer of deed, lease or mortgage.
Cooperative
A form of multiple ownership in which a corporation or business trust entity holds title to a property and grants occupancy rights to shareholders by means of proprietary leases or similar arrangements.
Cost of Funds Index (COFI)
A common index used in adjustable rate loans and based on the weighted-average interest rate paid by a defined group of savings institutions for sources of funds, usually by members of the 11th Federal Home Loan Bank District.
Credit Report
A report detailing the credit history of a prospective borrower, used to help determine creditworthiness.
Credit Risk
The possibility that the borrower may default on financial obligations to the investor.