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Mortgage Terms - C

Cap
Caps are used on adjustable rate mortgages (ARMs) to limit the interest rate and/or the payment. Most ARMs have a periodic cap that is around 2% per year and a life cap of around 5%-6% over the life of the loan. Payment only caps sometimes create negative amortization where the principal balance of the loan increases rather than decreases over time.
Capital Gain
Taxable profit on the sale of an appreciated asset.
Caveat Emptor
A legal term meaning "let buyer beware".
Certificate of Eligibility
A certificate obtained by a veteran from a Veteran's Administration office which states that the veteran is eligible for a V.A. insured 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 of property for the purpose of insurance by the Veteran's Administration.
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
The chronological order of conveyancing of a parcel of land, from the original owner to the present owner.
Chattel
Personal property.
Closing
Conclusion of a real estate sale, where the title of the property is transferred to the new owners and funds are transferred to the appropriate parties (seller, old lender, real estate broker, etc.).
Closing Agent
A third neutral party that facilities the closing of a real estate transaction. The closing agent can be an escrow company, title company, or attorney.
Closing Cost
Expenses incurred by the buyer/borrower and the seller in a real estate or mortgage transaction. There can be non-recurring cost that include points, appraisal fees, etc. that are a one time charge or recurring cost such as taxes and insurance that incur while the new buyer/borrower owns the real estate.
Closing Statement
Statement prepared for the buyer and seller itemizing all of the cost of a real estate transaction.
Cloud on Title
An invalid encumbrance on real property, which if valid, would affect the rights of the owner.
Collections
Co-Maker
Equally responsible for repayment as the borrower.
Commission
Fee paid for a broker or other entity for services rendered. Real estate brokers and mortgage brokers receive a commission for the services they provide; a real estate broker secures a buyer for a property that is for sale and a mortgage broker secure a mortgage loan for the buyer to finance the purchase of a property. Commissions are generally paid as a percentage of the sales price in a real estate transaction or the loan amount in mortgage transaction.
Commitment
A written promise to make or insure a loan for a specified amount and on specified items.
Comparables
Properties used as comparisons to determine the value of a specified property.
Conditional Commitment
A lenders promise to issue a loan subject to certain conditions. Generally, the lender will not fund the loan until the conditions have been met.
Conditional Offer
Purchase offer in which the buyer proposes to purchase only after certain occurrences (sale of another home, finding a loan commitment, etc.)
Condominium
A structure of two or more units, the interior space of which are individually owned.
Consideration
Anything of value given to induce another to enter into a contract. Earnest money deposit on a sales contract is consideration.
Construction Loan
Short term financing of real estate construction. Generally followed by the long term financing called a "take out" loan, issued upon completion of improvements.
Contingency
Condition which must be satisfied before the buyer can consummate the purchase of a property. Contingency are generally outlined in the purchase contract between the buyer and seller.
Contract of Sale
A purchase transaction in which the buyer receives possession of the property, but the seller retains title.
Conventional Loan
A mortgage loan that is not guaranteed or insured by the government. FHA and VA loans are not conventional loans. 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.
Conventional Mortgage
A loan neither insured by the FHA nor guaranteed by the VA.
Conversion Clause
A provision in some ARMs that allows you to change the ARM to a fixed-rate loan at some point during the term. Usually the conversion is allowed at the end of the first adjustment period. At the time of the conversion, the new fixed rate is generally set at one of the rate then prevailing for fixed-rate mortgages. The conversion feature may be available at extra cost.
Cost Plus Contract
A building contract setting the builder's profit at a set percentage of actual cost of labor and materials.
Contract Sales Price
The full purchase price as stated in the contract.
Cost Basis
Accounting figure that includes original cost of property plus certain expenses to purchase, money spent on permanent improvements and other cost, minus any depreciation claimed on tax returns over the years.
County
A division within a state, usually encompassing one or more cities or towns.
Customer
Typically, the buyer, as opposed to the principal (seller).
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