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Cap
A limit on how much a variable interest rate can increase. Many
adjustable rate mortgages have both annual (or semi-annual) rate
caps and lifetime caps. They limit the amount your payments can
increase in an adjustment period and over the life of the loan.
Capitalized
cost
The amount financed under a lease agreement.
Cash-Out
When
the principal amount of a new mortgage involved in refinancing is
greater than the principal amount outstanding of the existing
mortgage being refinanced, and all or a portion of the equity is
converted to cash.
Closed-end
lease
A lease that predetermines what the specific value of the leased
item will be at the end of the lease, and the fees that may be due
at that time.
Closing
The time and place at which all documents for your loan are signed,
dated and notarized. Also called a settlement.
Closing costs
Fees paid at or prior to the closing of your loan. They may include
attorneys' fees, as well as fees for preparing and filing a mortgage,
and for taxes, title search, and insurance. They include the expenses
incurred in obtaining the loan and in transferring the ownership
of any collateral property from the seller to the buyer. Generally
closing costs range from 2% to 6% of the mortgage amount.
Co-borrower
An additional person who assumes equal responsibility for repayment
of a loan and is fully obligated under the terms of the loan. This
person also has equal rights to the proceeds of the loan.
Collateral
An asset, such as a car or a home, used for securing the repayment
of a loan. The borrower risks losing the asset if the loan is not
repaid.
Collision insurance
Auto insurance that pays for repairing the damage to your car when
you've been in a collision with another auto.
Combined loan-to-value
ratio (CLTV)
The ratio between the unpaid principal amount of your first mortgage,
plus your home equity loan – or your credit limit in the case
of a line of credit – and the appraised value of your home.
Expressed as a percentage.
Commission
The fee charged by a broker or agent for negotiating a real estate
or loan transaction. A broker commission is generally a percentage
of the price of the property or loan.
Comprehensive
insurance
Auto insurance that pays for repairing the damage sustained to your
car in a non-collision accident. For example, theft, vandalism or
bad weather.
Condominium
or condo
A building or development with many housing units where each person
owns his or her individual unit and shares an interest in the common
areas and facilities of the entire project. You go through the same
process of buying a condo as you do when buying a house, and have
a deed to and a mortgage on your particular unit. You also pay property
taxes on your unit.
Conforming
loan
A mortgage loan that has the standard features as defined by and
is eligible for sale to Fannie Mae and Freddie Mac.
Contingency
A specified condition that the sales contract requires must be satisfied
before the home sale can occur. When buying a home, the two most
common contingencies are that the house must pass inspection and
that the borrower must be approved for a loan.
Contract
An oral or written agreement to do, or not to do, a certain thing.
Co-signer
A second person who signs your loan and assumes equal responsibility
for payment of the loan but receives no benefit from the loan proceeds.
Cost benefit
analysis
A dollar-value analysis that compares the benefits of owning a home
to the costs. Some home ownership benefits may include: tax savings
you may receive on the mortgage interest and property taxes you
pay; and the appreciation that may occur in the value of your home
over time, building your home equity. Home ownership costs may include:
interest you pay on the loan; closing costs, including any mortgage
points; property taxes and homeowner's insurance premiums; private
mortgage insurance premiums; and maintenance costs including those
associated with normal wear and tear and weathering.
Credit
An arrangement in which a borrower receives something of value in
exchange for a promise to repay the lender at a later date.
Credit reporting
agency or credit bureau
An organization that gathers, records, updates and stores financial
and public records of individuals who have been granted credit and
provides this information to lenders and other authorized users
for a fee.
Credit history
A record of an individual's debts and payment habits over time.
It helps a lender determine whether or not a potential borrower
is a good business risk.
Credit limit
The maximum amount you can borrow under a line of credit.
Credit report
A record of an individual's debts and payment habits. It helps a
lender determine whether or not a potential borrower is a good business
risk.
Credit score
A number, rating the quality of an individual's credit. Lenders
calculate this number, often with the assistance of computer systems,
as part of the process of assigning rates and terms to the loans
they make.
Creditor
A person or business from whom you borrow or to whom you owe money.
Creditworthiness
The likely ability of a borrower to repay debt.
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