Real Estate Glossary

Call option:

A provision in the mortgage or note that gives the lender the right to "call" or request that the mortgage due and payable in full at the end of a specified time period.



Cap:

Also known as a "rate cap," provision of an adjustable-rate mortgage (ARM) that limits the maximum interest rate on mortgage payments or how they may increase. See lifetime payment cap, lifetime rate cap, periodic payment cap, and periodic rate cap.



Capital:

Investment or other money: (1) used to create income, either as an investment in a business or an income property; (2) the money or property comprising the wealth owned or used by a person or business enterprise; (3) the accumulated wealth of a person or business; (4) the net worth of a business represented by the amount by which its assets exceed liabilities.



Capital expenditure:

The expense classification of an improvement (capital improvement) made to extend the useful life of real property or to add to its value.



Capital gains tax:

Federal tax paid on the gain realized upon the sale of an asset. Said tax is determined by the holding period of the asset and determined by the rate associated with the holding period.



Capital improvement:

A permanent improvement to real property that increases its value and useful life. A capital expenditure would include a major addition to an existing structure. See capital expenditure.



Cash reserves:

Excess cash available for business or other purposes. See reserves.



Cash-out refinance:

A refinance transaction whereby 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. A refinance transaction in which the borrower receives additional cash excess of closing costs that can be used for any purpose.



Certificate of deposit ("CD"):

A financial instrument issued by a bank or other financial institution that is evidence of a deposit, with the issuer's promise to return the deposit plus a specified or sometimes floating interest rate within a specified time period.



Certificate of deposit index:

A rate index that is used to determine interest rate changes for certain ARM plans. The index represents the weekly average of secondary market interest rates on six-month negotiable certificates of deposit. Index combined with margin will provide the rate on the mortgage. See adjustable-rate mortgage (ARM).



Certificate of Eligibility:

An official document issued by the federal government certifying a veteran's eligibility for a Department of Veterans Affairs (VA) mortgage. The certificate is issued to those with the required time of active-duty and other qualifications.



Certificate of title:

A statement or affidavit provided by an abstract company, title company, search company or attorney stating that the current owner legally holds the title in fee simple or otherwise to real property.



Certified mail notice:

A notice sent via the U.S. Postal Service requiring the signature of the recipient indicating that the posted item has been received. Certified mail differs from registered mail insofar as certified mail requires an executed return receipt by the recipient, while registered mail generates only a receipt by a postal official that the mailed item has been delivered to the address. Certified mail is an important and recognized service mechanism for foreclosure notices, and in certain situations, legal process.



Chain of title:

The history of all of the transactions, ownership or title documents that reference transfers of title to a particular parcel of real property, starting with the earliest existing document or transaction and ending with the most recent. The typical title search of the chain of title ranges from 30 to 50 years.



Change frequency:

The frequency (in months) of payment and/or interest rate changes related to an adjustable-rate mortgage (ARM). There are many versions of ARM’s such as 5/1, 3/1, 1/1 mortgages.



Circuit Court: 

An intermediate court similar to Superior Court in which most judicial foreclosures are filed and adjudicated.



Clear title:

A title that is free of liens, encumbrances or title issues or questions as to ownership or liens related to a particular property.



Closing:

A transaction at which the buyer signing the mortgage documents and paying closing costs finalizes a sale of a property. Also called the "settlement."



Closing agent:

The party who conducts the real estate closing. An attorney, title agent, title company or real estate agent depending on the state where the property is located may fill this role.



Closing costs:

Expenses and costs (over and above the price of the property) incurred by buyers and sellers in transferring ownership of real property. Closing costs normally include an origination fee, realty transfer taxes, an attorney's fee, taxes, an amount placed in escrow, and charges for obtaining title insurance and a survey. Closing costs will usually vary according to the area of the country in which closing takes place; lenders or real estate agents often provide estimates of closing costs to prospective homebuyers, which is called a good faith estimate (GFE).



Closing statement:

An itemization of closing costs and summary of a real estate closing that can be both for residential or commercial. See HUD-1 statement for residential closing.



Co-borrower:

An additional person who signs a promissory note along with the borrower on a loan. Contrast with endorser. See also non-occupant co-borrower.



Coinsurance clause:

A general requirement and 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:

An asset (such as real or personal property) that acts as security for the repayment of a loan. The borrower risks losing the asset or having it foreclosed upon if the loan is not repaid according to the terms of the loan contract.



Collection:

The efforts or actions used to bring a delinquent mortgage account current and/or to file the necessary notices to proceed with foreclosure when necessary.



Commission:

A fee charged by a broker or agent for negotiating a real estate or loan transaction. A commission is generally a percentage of the purchase price of the property or the loan amount.



Commitment letter:

A formal offer by a lender stating the terms under which it agrees to lend money to the purchaser of real estate or as part of a refinance. Also known as a "loan commitment" or "mortgage loan commitment."



Commitment period:

The length of time that the lender's loan commitment is valid during which time the borrower must act to accept it.



Common area assessments:

Charges and fees billed to individual unit owners in a condominium or planned unit development (PUD) project for owners' association costs and expenses and to repair, replace, maintain, improve or operate the common areas of the project or property.



Common areas:

An area jointly owned by the owners or tenants of a condominium complex or planned unit development (PUD) subdivision, for the common use of residents. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, gated entrances, etc.



Community property:

A form of marital ownership recognized in some states such as California under which property or assets acquired during a marriage is presumed to be owned jointly by husband and wife unless previously acquired as separate property of either spouse.



Comparables:

A reference to the sales history of "comparable properties" used for comparative purposes in the appraisal process to determine valuation. Comparables are properties similar to the property under analysis; they have reasonably the same size, location, and amenities and have recently been sold. Comparables help the appraiser determine the approximate fair market value of the subject property. Also referenced as "Comps."



Compound interest:

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



Concessions:

Items or expenses that are paid for or given by a landlord or seller to induce a prospective tenant or buyer to sign a lease or purchase real property.



Condemnation:

Usually a determination by a municipal body that a building or structure is not fit for use or is dangerous and must be destroyed; also refers to the taking of private property for a public purpose through an exercise of the right of eminent domain.



Conditions:

Matters that must be completed before a loan can be funded. Often referred to as underwriting conditions.



Condominium:

A real estate project in which each unit owner has title to a unit in a building, an undivided interest in the common areas of the project, and sometimes the exclusive use of certain limited common areas.



Condominium conversion:

Changing the ownership structure of an existing building (usually an apartment or rental project) to the condominium form of ownership for the purposes of the resale of individual units in fee.



Confession of judgment: 

A process through which a borrower executes a legal document that permits the issuance of an immediate judgment against the borrower in the event of a default of an underlying loan obligation, including a note that may be secured by a mortgage. This process skips the necessity of contested court proceedings and permits a faster execution and foreclosure.



Confirmation:

A process through which the procedural and legal aspects of the foreclosure are examined for legal sufficiency. This ensures all of the proper notice requirements were met before the sale and the foreclosed property may be confirmed or title transferred.



Conforming loan:

A mortgage loan that is within the loan amounts and underwriting guidelines that have been established by government-sponsored entities such as FNMA or FHLMC for mortgage loans being sold on the secondary market.



Consent foreclosure:

A form of uncontested foreclosure process in a judicial or other context in which the party being foreclosed upon agrees not to contest the proceeding or the eventual sale of the property involved.



Construction loan:

A short-term loan intended to finance the cost of construction, usually of a house. The lender makes payments to the builder at periodic intervals as the work progresses. Construction loans are usually interest-only loans based on floating rates tied to LIBOR or other indexes.



Consumer reporting agency (or bureau):

A CRA is an organization that compiles information about consumers’ credit histories. The three major credit reporting agencies are Equifax, Experian, and Trans-Union.



Contingency:

A condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector.



Contract:

A legally binding oral or written agreement to do or not to do a certain thing.



Contract of sale:

The agreement between the buyer and seller on the purchase price, terms, and conditions necessary to both parties to convey the title to the buyer.



Conventional mortgage/conventional loan:

A real estate mortgage that is not affiliated with the FHA or VA and meets conventional underwriting standards.



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 frames after loan origination or during the term of the loan.



Convertible ARM:

An adjustable-rate mortgage (ARM) that can be converted to a fixed-rate mortgage under specified terms and 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 by proprietary lease.



Cooperative corporation:

A business trust entity that holds title to a cooperative project in fee and grants occupancy rights to particular apartments or units to shareholders through proprietary leases or similar arrangements.



Cooperative mortgages:

Mortgages related to a cooperative project that is secured by cooperative shares. This usually refers to the multifamily mortgage covering the entire project but occasionally describes the share loans on the individual units.



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. No fee simple ownership exists in this form of ownership.



Corporate relocation:

Arrangements under which an employer or company 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 related to the costs attributed to depository funds that are 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. See adjustable-rate mortgage (ARM).



County court:

A local jurisdiction that handles the day-to-day business of county government.



Court of common pleas:

In Pennsylvania, the equivalent of Circuit Court or Superior Court in which foreclosure proceedings are filed and adjudicated.



Covenant:

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



Credit:

An agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date. An accounting term related to a payment in a balance sheet transaction.



Credit bureau:

An organization governed by the Fair Credit Reporting Act, that gathers, records, updates, and stores financial and public records information about the payment records of individuals who are being considered for credit.



Credit Disability Insurance:

A type of insurance available to borrowers that pays all or part of a minimum monthly payment for a specified length of time if the borrower becomes injured or disabled.



Credit history:

A record of an individual's open and fully repaid debts and delinquencies. A credit history helps a lender to determine whether a potential borrower has a history of repaying debts in a timely manner.



Credit life insurance:

A type of personal insurance available to borrowers that will pay off the mortgage debt if the borrower dies while the policy is in force.



Credit report:

A report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness. See merged credit report.



Credit report fee:

The fee charged by a lender to obtain an applicant's credit report for review in conjunction with a mortgage loan application.



Creditor:

A person to whom money is owed. The lender in a mortgage transaction.


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