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Glossary C
Cap
The limit an adjustable rate mortgage may adjust, either during a specific adjustment period or during the life of the loan. A cap protects the borrower from excessive increases in monthly payments. For instance, a loan might have a limit or cap of 1% during an adjustment period, with a total of 5% over the life of the loan. Look at the “worst-case” scenario to see if you are capable of making the highest payment allowed for an ARM.
Cash-Out
During a refinance, a homeowner might borrow more than what is currently owed on the home. This is called “cash-out”. Most cash-out situations result from the borrower needing money for home improvements or to pay off consumer debt.
CCR’s
See Covenants, Conditions and Restrictions.
Certificate of Eligibility
A document from the Veteran’s Administration showing that the Veteran named is qualified for a VA insured home loan. A Certificate of Eligibility may be obtained from the VA by submitting a copy of the Veteran’s DD 214 and a “Request for Eligibility” (VA form 1880). Since about 2002, the VA has been allowing the lender to request eligibility via the Internet for Streamline or Rate Reduction Refinances.
Certificate of Reasonable Value
A form required by the Veteran’s Administration showing the appraised value of the property.
Certificate of Title
Not to be confused with Title Insurance, a Certificate of Title is an opinion of the status of the title to a certain property.
Certification and Authorization
A form the borrower signs at application for a loan, certifying that all the information on the application is true and correct. This form also serves as the lender’s authorization to verify the borrower’s credit, income, employment history, accounts and balances at financial institutions and copies of income tax returns.
Closing
The act of completing the loan process.
Closing Agent
An unbiased third party charged with holding the funds and documents during the loan process. This is usually an escrow company or lawyer.
Closing Costs
Fees paid for the purpose of refinancing or buying in a real estate transaction. (Points, Title Insurance, escrow fees, etc.)
Closing Meeting
In some parts of the country, all parties meet and exchange money and title to the property. (Takes the place of Escrow.)
Closing Statement
Also called a Settlement Statement or HUD 1. A form prepared by the closing agent itemizing all of the costs incurred during the transaction.
COFI
See Cost of Funds Index
Combined Loan-To-Value
After totaling all loans on a property, the ratio of that balance to the value of the property. For instance, if a home has a 1st mortgage for $200,000, a 2nd for $50,000 and a value of $750,000, the CLTV would be 33%. ($200,000 plus $50,000 divided by $750,000)
Commitment
A loan approval from the lender, offering to make the loan under certain conditions, including loan amount, interest rate and term. A commitment has an expiration date.
Conforming Loan
A loan which meets all the guidelines of the two federally sponsored housing agencies, Freddie Mac and Fannie Mae.
Conventional Mortgage
A mortgage that is not insured by the Federal Housing Administration (FHA) or guaranteed by the Veteran’s Administration. (VA)
Construction Loan
An interim loan for the purposes of building. The funds are paid to the contractor in increments as the work progresses.
Conversion Clause
Some adjustable rate mortgages have a clause whereby the borrower can convert the AMR into a fixed-rate loan.
Convertible ARM
An adjustable rate mortgage with a conversion clause.
Cost of Funds Index
An index used to price some adjustable rate mortgages. It is a calculation of the interest paid on deposits by members of the 11th Federal Home Loan Bank District. Also called the 11th District Cost of Funds.
Courier Fees
Overnight mail fees incurred by escrow on the borrower’s behalf.
Covenants, Conditions and Restrictions
Also called CC&R’s. A document that details what uses and restrictions are placed on a property, usually in a condominium or Planned Unit Development. Some older CC&R’s are now illegal due to discrimination.
Credit Report
A report, usually from information combined from the 3 major credit bureaus that detail a borrower’s credit history, including any public records such as bankruptcy and judgments. This is used to judge a borrower’s credit-worthiness.
Credit Report Fee
A fee, usually up-front, that a lender charges to run a borrower’s credit report. This fee is charged by the credit reporting company to the lender and then is passed on to the borrower. This is another fee that you should not feel funny about paying for “up-front.”
Credit Score
A score given by each credit reporting companies that is used to judge the credit-worthiness of a borrower. Scores are determined by various facts, such as past payment history, number of open accounts and the ratio of the balance of each account to its limit. For instance, two people have a credit card with a limit of $5,000. Borrower “A” has a balance of $500 and borrower “B” has a balance of $4,500. Borrower “A” would be making better use of his credit, and therefore have a slightly higher credit score.
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Letter A