| Letter
- C |
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| Call Option |
If your mortgage has a call option, it means that your lender may demand full payment of the mortgage after the end of a specified period. There does not have to be a specific reason for the lender to call the loan due in full, and you will either need to pay the loan off or refinance the mortgage. |
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| Capitalized Cost |
The term capitalized cost is often used when you are leasing a vehicle. The term refers to the sale price of the vehicle and equates to the amount that you would pay for the vehicle if you were actually purchasing it. When you lease a vehicle, the capitalized cost is the price the dealer charges the leasing company for the vehicle. |
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| Capitalized Cost Reduction |
The capitalized cost reduction on a leased vehicle is the same as the down payment you would make when you purchase a vehicle. Either in the form of a cash down payment, a vehicle trade in or a combination of both, the value of the capitalized cost reduction lowers the amount of the lease’s capitalized cost. |
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| Cash-Out Refinance |
When you take out a cash-out refinance, you are borrowing more money than the amount that you need to pay off your existing mortgage and to pay for all of the costs associated with the refinance. The excess funds of this refinance are paid to you at closing. These funds become part of your new loan agreement and the lien against your home. |
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| Certificate Of Eligibility |
If you are a qualified veteran in need of a loan to buy a home or start a business, you can receive a certificate of eligibility. This document shows that you are entitled to a VA guaranteed loan. To obtain a certificate of eligibility, contact your local VA office and request a form 1880 which you will need to return to the office along with your DD-214. |
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| Certificate Of Reasonable Value (CRV) |
When you are applying for a VA loan, the Veteran Administration will send an appraiser to estimate the value of the home. Based on this professional’s appraisal, the VA will issue a certificate of reasonable value or a CRV. This document will state the maximum dollar amount that you can borrow to purchase the home. |
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| Certificate Of Title |
When you purchase a home, a title company or an attorney will be hired to research and ensure that the title to the property that you are purchasing is legally and rightfully held by the seller and that the title is free and clear of any liens and encumbrances (except, perhaps, any liens due to loans that will be paid at closing). Once the company verifies this information, they will issue a certificate of title. |
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| Chain Of Title |
A chain of title shows you, in chronological order, the history of all of the documents that are related to the transfer of ownership of a piece of property. The chain of title is used in order to establish that the current owner of the property holds rightful title and it can usually be traced back to when the United States received rights to the property. |
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| Change Frequency |
When you have an adjustable rate mortgage, or ARM, the term “change frequency” refers to the period of time that elapses between when your loan’s interest rate can be changed. Your change frequency is measured in months. |
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| Clear Title |
When you have been given a clear title, it means that you have been given title to a property that is free of any liens and disputed interests and that there are no questions as to the ownership of the property. This means that the seller that you are purchasing the property from is the only one who holds any legal claim to the property whatsoever. |
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| Closed-End Lease |
When you lease a vehicle with a closed-end lease, it means that all of the costs and residual value are determined up front and when the lease is over, you have no further obligations in regards to the lease. Any depreciation of the vehicle at the end of the lease becomes the responsibility of the lease company. This type of lease is also known as “walk away” lease. |
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| Closing |
When you purchase or sell a home, you will need to attend a closing, also known as a settlement. The closing is the point at which the buyer, seller, lender and real estate agents meet and where the title to the property and the funds involved are legally exchanged. If you are purchasing a home and didn’t have possession of the property prior to closing, this is also the point in time where you’ll be given any keys and will gain possession of the property. |
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| Closing Costs |
When you buy or sell a home, certain expenses are incurred that are referred to as closing costs. These costs fall into one of two categories. Nonrecurring closing costs are those expenses that are incurred by the buyer in relation to purchasing the property and obtaining the loan. These are one-time costs that won’t need to be paid again. Pre-paid closing costs are items, like property taxes and insurance, that will be paid on a recurring basis. When you buy a home, you should receive a Good Faith Estimate of these closing costs within three days of submitting your loan application to your lender. |
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| Closing Statement |
A closing statement is a statement that is prepared by a lender, broker, escrow agent or attorney that you will receive either on the day of closing or shortly thereafter. This statement will give you a breakdown of the costs paid at closing. If your property is in escrow when it closes, you will normally receive the closing statement within 24 hours of recording of the deed of trust. |
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| Cloud On Title |
If you are purchasing a home and a title search is performed and there are any outstanding claims found on the property, there is said to be a “cloud on title” and for the cloud to be removed, a court action needs to be taken. Sometimes a quitclaim deed or release will be effective in having the cloud removed. |
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| Co-Borrower |
A second person on the title of a loan. If your credit rating isn’t good enough to qualify you for a loan, a co-borrower can help you get the loan you need by co-signing for you. The co-borrower, sometimes referred to as a co-signer, would sign the promissory note with you and if you were to default on the loan, the loan would then become their responsibility. |
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| Collateral |
When you take out a loan, the collateral is the property that secures the loan. With a mortgage, the collateral is your home and with a car loan, the collateral is the car. If payments on a loan aren’t made, the collateral can be repossessed or foreclosed on by the lender according to the terms of the loan. |
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| Collection |
The process when a lender attempts to bring an account current when loan payments becomes delinquent. If you do not bring your loan current when your account is in collection, your creditor may begin to process the paperwork required to gain possession of the loan’s collateral. In the case of a mortgage, this step of the collection process would mean filing notices to proceed with foreclosure and in the case of a car loan, it would mean repossessing the vehicle. |
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| Combined Loan To Value (CLTV) |
If you have more than one mortgage out on your property, the amount of the two mortgage principals combined and divided by the appraised value of your home (or sales price if the sales price is less than the appraisal amount) is your combined loan to value, or CLTV. |
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| Commission |
The compensation that is paid to a professional, such as a mortgage broker or a real estate agent, for the sale of a product or service. Commission is usually based on a percentage of the loan amount or sales price. If you’re buying a home, you will pay your mortgage broker a commission and if you are selling a home, your real estate agent would be paid a commission. |
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| Commitment |
When you receive a commitment from a lender, it means that they are agreeing to make a loan to you, subject to compliance with certain stated conditions. Usually this commitment will outline a specific timeframe and a specific interest rate. The term commitment is also used to refer to the promise an investor makes when agreeing to purchase a mortgage from a lender. |
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| Comparable Sales Or Properties |
When you have your home appraised, the appraiser will look for properties like yours that have been recently sold. These homes will be approximately the same size as your home, be in the same location, and have the same features and amenities. The sales price of these properties will help the appraiser determine the value of your property. |
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| Compound Interest |
The interest expense that is calcualted on the principal sum of a loan plus the accrued interest of that sum. When you begin a new interest period, all of the interest from the previous interest period is added to the principal balance and a new principal amount is calculated. Compound interest can be calculated daily, monthly, semiannually, or annually. |
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| Comprehensive Insurance |
If damage occurs to your car for reasons other than a collision, comprehensive insurance will pay for the damage your car sustains. Some things that comprehensive insurance covers include flood, hail, theft, fire, explosions, vandalism, malicious mischief and damage from animals. |
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| Construction Loan |
An interim loan that is used to pay for the building of a home as it is constructed. Your lender will make payments to your builder as work on your home progresses. This is generally a short-term loan, but sometimes when the home is completed, the lender will convert the loan to a traditional mortgage. If the lender is not willing to convert the loan, you will either need to pay the loan in full or refinance the loan with another lender. |
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| Consumer Reporting Agency (or Bureau) |
An organization that creates the reports that lenders use when determining your creditworthiness. These agencies keep detailed files in regards to your payment history. When you make payments to credit card companies, on installment loans and on revolving credit accounts, your lenders report your payment history to these companies. |
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| Contingency |
A stipulation that must be satisfied to render a contract legally binding. For example, when you purchase a home, the offer might be contingent upon financing approval or contingent upon the sale of your current home. The contract to purchase the home wouldn’t be binding until these conditions were met. |
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| Contract Of Sale |
The written agreement that is made between a buyer and seller of property that outlines the terms and conditions and price of the sale. |
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| Conventional Mortgage |
When you take out a mortgage from a commercial, non-governmental lender, it is usually referred to as a conventional mortgage. When you have a conventional mortgage it means that your mortgage is not insured by the federal government. Generally, conventional mortgage amounts cannot exceed 80 percent of your home’s appraised value. |
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| Convertibility Clause |
If your mortgage has a convertibility clause, it means that you are able to change your adjustable-rate mortgage, or ARM, to a fixed-rate mortgage at a pre-negotiated timeframe under certain conditions. |
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| Convertible Arm |
An adjustable-rate mortgage that will allow you to convert your loan into a fixed-rate mortgage within a specific timeframe. This timeframe is usually within the first five years of your loan. Your lender may require you to pay a fee for this conversion, so borrowers should ensure they are aware of any conditions prior to pursuing this option. |
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| Cost Of Funds Index (COFI) |
With adjustable rate mortgage, how and if that rate changes may be determined by what is called a “cost of funds index” or a COFI. This index tracks the weighted average cost of borrowings, savings, and advances of various financial institutions such as savings and Loans and banks. |
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| Covenant |
A written agreement between two people where the parties agree to do or not to do certain things. In regards to your mortgage, a covenant is a clause that obligates you to certain conditions or restricts you from certain actions. If this covenant is violated, it may result in the foreclosure of your home. |
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| Credit History |
A record of your debt payments that is generally maintained by three different credit reporting agencies. When you apply for a mortgage or any other type of loan or line of credit, the lender will pull your credit history to help determine whether or not you are likely to fulfill your obligations under the loan if you were to be approved. |
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| Credit Life Insurance |
A type of insurance that would pay the balance of your mortgage if you were to die before the mortgage was paid off. Sometimes this type of policy offers a disability clause in addition to a death clause, allowing for payment of the mortgage if you were to become permanently disabled. |
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| Credit Report |
A written report of your debt payment history that can be generated by one of the three credit reporting agencies, also known as credit bureaus. When you apply for credit, a lender will pull your credit report to review your creditworthiness and determine whether or not you can be approved for the loan. |
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| Credit Score |
A number that is determined by a statistical analysis of your credit history. Items on your credit report, like payment history, collection accounts, judgments, and outstanding debt are all factored in when determining your credit score. Scores range from 365 to 840, with the lower scores reflecting a poorer credit history. |
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