Mortgage and Real Estate Glossary

Real Estate Definitions and Terms: C

Offers a Mortgage and Real Estate glossary for real estate and mortgage terms and definitions for home buyers, home sellers, and real estate consumers. Find expanded definitions of important real estate and mortgage home loan terms.

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Definitions and Terms: C

Calendar Year - Year which uses the actual number of days in each month for a total of 365 days in a year (366 days in a leap year).

Callable Debt - Debt security in where the issuer has the right to redeem the security at a specified price on or after a specified date, but prior to its stated final maturity date.

Cap - Set percentage amount by which an adjustable rate mortgage may adjust each adjustment period. For adjustable loans, caps are usually quoted as two numbers as in 2/6. The first number indicates how much a loan may adjust at each adjustment period while the second number indicates how much a loan may adjust over its lifetime.

Loans like the 3/1 and 5/1 adjustable which have an initial fixed period are quoted with 3 numbers as in 3/2/6 which would mean that the first adjustment may be as much as 3%, subsequent adjustments are capped at 2% each, and the lifetime cap is 6%.

Two-Step loans are quoted with a single cap, which is the amount by which the loan may adjust at its single adjustment date.

Capital - Accumulated wealth. A portion of wealth which is set aside for the production of additional wealth; specifically, the funds belonging to the partners or shareholders of a business, invested with the expressed intention of their remaining permanently in the business.

Capital Gain - Taxable profit on the sale of an appreciated asset.

Capitalization - The estimation of the value of income producing property by dividing the annual net income by the Capitalization Rate.

Capitalization Rate - The rate of expected return on investment property. A ratio of income to value.

Cash Out - Receiving money back when refinancing your present mortgage.

Cash Reserves - A cash amount sometimes required to be held in reserve in addition to the down payment and closing costs; the amount is determined by the lender.

Carryback Loan - A loan in which a seller agrees to finance a buyer in order to complete a property sale.

Caveat Emptor - A legal term meaning "let the buyer beware".

Ceiling - The maximum allowable interest rate over the life of the loan of an adjustable rate mortgage.

Certificate of Eligibility - A veteran's evidence of entitlement for a VA-guaranteed loan.

Certificate of Occupancy - Document issued by a local governmental agency that states a property meets the local building standards for occupancy.

Certificate of Reasonable Value (CRV) - An appraisal that has been performed on a property that is being paid for a VA loan. After the property has been appraised, the eterans Administration issues a CRV.

Certificate of Title - A document provided by a qualified source (such as a title company) that shows the property legally belongs to the current owner; before the title is transferred at closing, it should be clear and free of all liens or other claims.

Certified Copy - A true copy, attested to be true by the officer holding the original.

Cestui que trust - One having an equitable interest in property, legal title being vested in trustee.

Chain of Title - A history of conveyances and encumbrances of a property from some starting point, whereby the present owner derives title.

Channeling - The illegal practice of directing people to, or away from, certain areas or neighborhoods because of minority status; Steering.

Chattel - Personal property.

Clear Title - A title that is free of liens or any legal question as to the ownership of the property.

Client - Person (or other entity such as a company) who employs the agent. Typically the seller is a client of the listing agent. The buyer can be a client (buyer's broker) or customer (seller's broker). A Client is also known as the Principal.

Closing - Final arrangements to transfer title of property as well as allocate charges and credits.

Closing Costs - Closing costs are fees paid by the borrower when a property is purchased or refinanced. Costs incurred include a loan origination fee, discount points, appraisal fee, title search, title insurance, survey, taxes, deed recording fee, and credit report charges. All closing costs are separated into "non-recurring," and "pre-paid." Non-recurring charges are any items that are paid only once because a loan was obtained or a property bought, such as a loan origination fee. Pre-paid charges are those that recur over time, like insurance and property taxes. These are summarized in the Good Faith Estimate.

Cloud on Title - An outstanding claim or encumbrance, that, if valid, would affect or impair the owner's property title.

Collateral - Property, real or personal, pledged as a security to back up a promise. In a home loan, the property is considered collateral that can be revoked if loan is not repaid according to the terms of the mortgage or deed of trust.

Co-Maker - Equally responsible for repayment as the borrower.

Commingling - The illegal practice of combining or mixing client's funds with the agent's own funds.

Commission - An amount, usually a percentage of the property sales price, that is collected by a real estate professional as a fee for negotiating the transaction.

Commitment - A written letter of agreement detailing the terms and conditions by which the lender will lend and the borrower will borrow funds to finance a home.

Community Reinvestment Act (CRA) - The federal law which requires federally regulated lenders to describe the geographical market area they serve. Deposits from that area are to be reinvested in that area whenever practical.

Comparables - Properties which are similar to a particular property and are used to compare and establish a value for that property.

Compound Interest - Interest which is computed on the principal and any unpaid accumulated interest.

Condemnation - The act of taking private property for public use, through due process under the right of Eminent Domain, with compensation to the owner.

Condominium - A form of ownership in which individuals purchase and own a unit of housing in a multi-unit complex; the owner also shares financial responsibility for common areas.

Confidentiality - An agent is obligated to safeguard his/her principal's lawful confidences and secrets. Therefore, a real estate broker must keep confidential any information that may weaken a principal's bargaining position. The duty of confidentiality precludes a broker who represents a seller from disclosing to a buyer that the seller can, or must, sell a property below the listed price. Conversely, a broker who represents a buyer is prohibited from disclosing to a seller that the buyer can, or will, pay more than what has been offered for a property.

The duty of confidentiality does not include an obligation by a broker who represents a seller to withhold know material facts about the condition of the seller's property from the buyer, or to misrepresent the property's condition. To do so constitutes misrepresentation and impose liability on both the broker and the seller.

Conforming Loan - A mortgage loan for up to $333,700 in the continental United States (Alaska and Hawaii limits are higher).

Consideration - The price or subject matter which induces a contract; may be in money, commodity, exchange, or a transfer of personal effort.

Construction Loan - A short term loan for funding the cost of construction. The lender advances funds to the builder as the work progresses.

Contingency - The dependence upon a stated event which must occur before a contract is binding. The most common contingency is a clause stating that the buyer must sell their present home before the contract becomes binding. If the buyers home does not sell within the time specified in the contract, the contract is cancelled.

Contingent Fee - Any fee that is earned upon the occurence of some specified event. Example: Listing contracts usually specify that the listing agent will be paid a fee at closing.

Conventional Loan - A private sector loan, one that is not guaranteed or insured by the U.S. government.

Contract - A legally enforceable agreement to do, or not to do, a particular thing for a consideration.

Contract for Deed - A contract for the sale of real estate where the deed (title) of the property is transferred only after all the payments have been made. Also known as a land contract, conditional sales contract, or installment contract.

Contract for Exchange of Real Estate - A contract for the sale of real estate in which the consideration is paid wholly or partly in real property instead of cash.

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. Sometimes called Land Contract, Contract of Purchase, Purchase Agreement, or Earnest Money Contract.

Contract Sales Price - The full purchase price as stated in the contract.

Conventional Mortgage - A mortgage loan that is obtained without any additional guarantees for repayment, such as FHA insurance, VA guarantees, or private insurance. This is usually given at an 80% loan-to-value ratio.

Conversion Clause - The right of a borrower to convert an adjustable or balloon loan into a fixed loan. The Conversion Option column on balloon tables indicates the right of a borrower to convert this balloon loan. The possible options are as follows...

Option Description
Not Available Borrower May Not Convert This Loan.
Must Requalify Borrower May Convert But Must Requalify.
Conversion Fee Applies
Auto-Qualify Borrower May Convert And Is Automatically Qualified.
Conversion Fee Applies

Convertible ARMs - ARMs that have a provision allowing the borrower to convert the mortgage to a fixed rate term. The conversion feature is outlined in the mortgage note and has certain restrictions.

Conveyance - Written instrument, such as a deed or lease, that evidences transfer of some ownership interest in real property from one person to another.

Cooperating Agent - A real estate agent who sells a property. The selling agent may be (1) the subagent or listing agent of the seller; (2) a buyer's agent; or (3) a dual agent. Also called a selling agent or participating agent.

Cooperative (Co-op) Housing - Residents purchase stock in a cooperative corporation that owns a structure; each stockholder is then entitled to live in a specific unit of the structure and is responsible for paying a portion of the loan.

Cost Approach to Value - An estimate of value based on current construction costs, less depreciation, plus land value.

Cost Basis - Accounting figure that includes original cost of property plus certain expenses to purchase, money spent on permanent improvements and other costs, minus any depreciation claimed on tax returns over the years.

Cost Plus Contract - A building contract setting the builder's profit as a set percentage of the actual cost of labor and materials.

Counter Offer - An offer made in response to a previous bid.

County - A division within a state, usually encompassing one or more cities or towns. In Louisiana this division is known as a Parish.

Covenenant - A written agreement or restriction on the use of land or promising certain acts. Homeowner Associations often enforce restrictive covenants governing architectural controls and maintenance responsibilities. However, land could be subject to restrictive covenants even if there is no homeowner's association.

Credit History - History of an individual's debt payment; lenders use this information to gouge a potential borrower's ability to repay a loan.

Credit Limit - The maximum amount that you can borrow under a home equity plan.

Credit Loan - A credit loan is a mortgage that is issued on only the financial strength of a borrower, without great regard for collateral.

Credit-Loss Ratio - The ratio of credit-related losses to the dollar amount of MBS outstanding and total mortgages owned by the corporation.

Credit Rating - Borrowers are rated by lenders according to the borrower's credit-worthiness or risk profile. Credit ratings are expressed as letter grades such as A-, B, or C+. These ratings are based on various factors such as a borrower's payment history, foreclosures, bankruptcies and charge-offs. There is no exact science to rating a borrower's credit, and different lenders may assign different grades to the same borrower.

Credit-Related Expenses - The sum of foreclosed property expenses plus the provision for losses.

Credit-Related Losses - The sum of foreclosed property expenses plus charge-offs.

Credit Report - A report to a prospective lender on the credit standing of a prospective borrower. Used to help determine creditworthiness. Information regarding late payments, defaults, or bankruptcies will appear here.

Credit Score - A number representing the possibility a borrower may default; it is based upon credit history and is used to determine ability to qualify for a mortgage loan.

Cul-de-Sac - A dead end street which widens sufficiently at the end to permit an automobile to make a "U" turn.

Customer - Buyer who is working with an agent who represents the seller. The term may also define a seller who is working with an agent who represents the buyer

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