FHA Loan and Mortgage Glossary - Terms Beginning with 'C'
Cap: For adjustable rate mortgages this is the highest the allowable interest rate can go. There is also a payment cap that is the highest a monthly mortgage payment can go. When a mortgage contract is signed the borrower should note the cap values so that they know the highest amount their monthly mortgage payment can be based on the interest rate cap and payment cap.
Capital Improvement: A repair or remodel of a property's structure or area that adds life to the property or value to the property.
Cash-Out Refinance: A refinancing option for property owners that allows them to refinance their mortgage in order to take cash out of the built up equity in the home. Depending on the refinancing lender this cash may be used for home improvements, personal investments, purchases, education, or any other allowable expenses.
Certificate of Eligibility: For veterans this certifies their eligibility to use the VA Home Loan Guarantee Program. A Certificate of Eligibility can be obtained by going to a VA approved lender and giving the veteran's personal information through the ACE system on the internet which will only take a few minutes. A Certificate can also be obtained by going to the VA's website and filling it out on-line or by mail.
Certificate of Reasonable Value: For veterans who are planning to use the VA Home Loan Guarantee Program this certifies the maximum value of the property that the VA will allow to be financed for a mortgage home on that particular home.
Certificate of Title: This comes from a Title company and certifies that the property is owned by the seller.
Clear Title: The title to the property is free of all liens and encumbrances and is ready for sale to the buyer without any claim by another party to ownership.
Closing: The meeting at the end of a property sale where the buyer signs all of the purchasing and mortgage paperwork and the seller signs all of the property sale paperwork in order to transfer the property to the new owner and legally ensure the transfer of funds and terms of payment for the new borrower’s mortgage.
Closing Costs: The fees and costs of the sale of a property. These fees and costs include the loan origination fee, the appraisal fee, the title fees, the recording fees, the lender fees, points, and any other necessary fees or costs like mortgage insurance premiums and broker fees.
Co-Borrower: This is also referred to as co-maker. This is the person who agrees to the same conditions of the sale and mortgage as the primary borrower. If for any reason the primary borrower fails to pay the mortgage the co-borrower agrees to also take full responsibility for payment of the mortgage loan. If there is derogatory action on the credit or in court proceeding, both the primary borrower and co-borrower are held equally liable.
Collateral: Some type of asset that guarantees the payment of a loan. For home loans the lender holds a lien on the title of the property as collateral. This lien is not released until the loan is paid in full. In the case the home is sold then the lien holder will be paid what they are owed first and then the remainder of the sale proceeds would go to the seller.
Collection: The steps that a mortgage lender must take to make sure their loan is repaid in the case a borrower defaults on the mortgage contract. In some cases the lender makes arrangements to collect the past monies due and allows the borrower to continue making payments as usual and keep the home. When this is not possible then the collection may call for foreclosure proceedings.
Commission: The amount of money a borrower pays as a fee to a mortgage broker for finding and facilitating their mortgage loan. It is also a fee that is paid by the seller to a real estate agent for finding a buyer for their home.
Commitment Letter: A letter that is given as an offer to purchase a home. Usually this letter contains a price and terms or purchase offer.
Construction Loan: A loan that is used for the purposes of constructing a new home. This type of loan can include the cost of the land, the home, and all amenities and landscaping for the home. The mortgage company will appraise the future value of the home to determine the amount that can be borrowed to build. They will also be in contact with the building company and release the money for the home directly to the builder in increments on a fee schedule as the home is being built.
Consumer Reporting Agency: These are also called credit bureaus. The three larges consumer reporting agencies are Equifax, Experian, and Transunion. They keep track of positive and negative credit reports from lenders so that other lender can use the credit history to determine the creditworthiness of a borrower.
Contingency: A condition of sale for a property. The buyer and seller may agree on a price, but this may be contingent on the appraisal or the home inspection.
Contract: A written or oral agreement that binds two parties to do what is agreed upon.
Conventional Mortgage: A mortgage loan that is funded through a mortgage company on traditional terms and not guaranteed by the government through the VA or the FHA.
Convertibility: For adjustable rate mortgages there may be the option of converting to a fixed rate mortgage in the contract. This way a total refinance would not be necessary. The borrower could convert the ARM into a fixed rate mortgage without paying all of the fees associated with a total refinance. However, there may be a fee associated with the conversion.
Credit: When a person agrees to take an item or service based on their future intentions to pay for the item or services.
Credit History: The past records of a how a person pays their credit and who has extended them credit for what items.
Credit Report: The records for each particular person from the credit reporting agencies that show all of their past and current creditors, balances owed, payment history, credit inquiries, and more.