Financial Glossary
Call Provision
A clause in the mortgage or deed of trust giving the mortgagee or beneficiary the right to accelerate payment of he mortgage debt in full on a certain date or on the happening of specified conditions.
Canceled Check
A "used" check that has been paid and subtracted from the check-writer's account. Canceled checks have extra data on them from the bank. The images are usually mailed to the writer each month with the statement, although many banks keep records that are available upon request. Canceled checks are excellent receipts that should be kept for reference and tax purposes.
Cap
A provision of an ARM limiting how much the interest rate or mortgage payments may increase or decrease.
Cap (on Interest)
Consumer safeguard which limits the amount the interest rate on an adjustable rate mortgage may change per year and/or the life of the loan.
Capacity
A borrower's financial ability to repay debt. See the 3 Cs of Credit for more detailed information.
Capital
A stock of accumulated wealth used or available for producing more wealth.
Capital Asset
Permanent property used to produce income, such as land, buildings and machinery.
Capital Gains
Profit earned from the sale of real estate. A seller may defer taxes on the capital gain of his/her primary residence by buying a higher priced residence within 2 years.
Capital Loss
The loss derived from the sale of a capital asset. May be short-term or long-term.
Capitalized Cost
The amount of money you finance in a lease. Also referred to as "cap cost." If you make a down payment in a leasing situation, it is often called a "cap cost reduction."
Car Credit Wizard
An educational tool that gives you an easy way to estimate your credit and get connected to dealers that can help you with the right type of financing. Try the Car Credit Wizard.
Cardholder Agreement
The written statement that defines and explains all legal terms for a credit card agreement. It includes payment terms, billing dispute procedures and communications guidelines, among other items.
Cash
Money in the form of paper and coins (e.g., U.S. dollars and cents). In banking, this is the act of paying a check.
Cash Advance Fee
A fee assessed when a card holder uses a credit card to obtain cash. These fees are often charged as a percentage of the cash obtained.
Cash Equivalent Value
A method of calculating the appraised value of a property that considers sales and financing concessions when evaluating comparable property. There is no standard in the appraisal industry for measuring cash equivalent value, but investors and mortgage insurers sometimes insist that cash equivalency be incorporated in the appraised values.
Cash Flow
The amount of cash derived over a certain period of time from an income-producing property. The cash flow should be large enough to pay the expenses of the income producing property (mortgage payment, maintenance, utilities, etc.).
Cash Market
A market where mortgage and/or mortgage-backed securities are bought and sold for immediate delivery and cash payment. Also called a spot market.
Cash Out
Receiving money back when refinancing your present mortgage.
Cash Reserve
A requirement of some lenders that buyers have sufficient cash remaining after closing to make the first two mortgage payments.
Cash-Out Explanation Letter
A handwritten, signed and dated letter provided by borrowers who are receiving cash from a refinanced loan transaction. The letter explains how they intend to use that cash. Generally used to verify that borrowers do not intend to use the cash to incur additional debt that will add to their monthly obligations and decrease disposable monthly income.
Cashier's Check
A check issued by a bank, drawn on its own funds rather than on one of its depositor's funds.
Caveat Emptor
A legal term meaning "let buyer beware". The buyer must examine the property and buy at his/her own risk.
CC&R's - Covenants, Conditions, and Restrictions
The basic rules establishing the rights and obligations of owners of real property within a condominium, townhouse, PUD, subdivision or other tract of land. An association is organized for the purpose of operating and maintaining property commonly owned by the individual owners. The association is normally made up of property owners.
Ceiling
The maximum allowable interest rate over the life of the loan of an adjustable rate mortgage.
Certificate of Deposit
A savings account in which an individual promises to deposit the money for a set period of time, for which the bank pays higher interest than a regular savings account.
Certificate of Eligibility
The document issued by the Veterans Administration to those that qualify for a VA loan which may be used to buy a house with 0 down. Certificates of eligibility may be obtained by sending the form DD-214 to the local VA office along with VA form 1880.
Certificate of Occupancy
Document issued by a local governmental agency that states a property meets the local building standards for occupancy and is in compliance with public health and building codes. This document is normally required by a lender prior to closing the loan.
Certificate of Reasonable Value (CRV)
An appraisal performed by a VA approved appraiser which establishes the property's current market value. This value establishes the ceiling on the maximum VA mortgage loan principal.
Certificate of Reasonable Value (CRV)
A document issued by the Department of Veterans Affair that establishes the maximum value and loan amount for a VA guarantee mortgage.
Certificate of Title
An opinion rendered by an attorney as to the status of title to a property, according to the public records. This certificate does not the same level of protection as title insurance.
Certified Copy
A copy of an original attested to be a true and exact duplicate of the original.
Certified Mortgage Banker (CMB)
A professional designation in the mortgage banking industry.
Chain of Title
The chronological order of conveyance of a parcel of land from the original owner to the present owner.
Change Date
This is a date established with an adjustable rate loan contract when a new interest rate will be assessed. Also known as an adjustment date.
Chapter 13 Bankruptcy
Chapter 13 Bankruptcy is a debt reorganization plan where debts are repaid under a court-supervised repayment plan. Debtors submit part of their income for distribution among creditors. Also known as the wage-earner plan.
Chapter 7 Bankruptcy
A Chapter 7 Bankruptcy is a straight liquidation bankruptcy where the debtor submits all of his or her non-exempt assets to a trustee for liquidation; proceeds are disbursed to creditors.
Charge Card
A card that requires a user to pay off the entire balance every month.
Charge-Off
A delinquent credit account with a balance owed that was never fully satisfied and the creditor removed it from the books for accounting purposes even though the debtor still owes payment in full.
Charge-Off
A delinquent credit account with a balance owed that was never fully satisfied and the creditor removed it from the books for accounting purposes even though the debtor still owes payment in full.
Check
Any written document instructing a bank to pay money from the writer's account.
Checking Account
An account for which the holder can write checks. Checking accounts pay less interest than savings accounts, or none at all.
Clear
A check "clears" when its amount is debited (subtracted) from the payer's account and credited (added) to the payee's account.
Clear Title
A marketable title, free of clouds and disputed interests. Most lenders require a clear title prior to closing.
Closing
The act of transferring ownership of a property from seller to buyer in accordance with a sales contract.
Closing Costs
Expenses incurred by the buyer and seller in a real estate or mortgage transaction. There are two types of costs: recurring and non recurring.
Closing Costs
The fees you usually have to pay at the start of a home equity loan. These can include an application fee, points (a percentage of the amount you borrow), attorney's fees, and additional expenses. Also known as "settlement costs." To get the exact closing costs you might be charged, please contact your lender.
Closing Statement
A statement required by federal law (the Real Estate Settlement Procedures Act) that itemizes all changes imposed on the borrower and seller (if any) in connection with a mortgage-secured loan transaction. Also known as a Settlement Statement, HUD-1 or HUD-1A.
Cloud on Title
An outstanding claim or encumbrance that, if valid, would affect or impair the owner's title. Compare with clear title.
Co-Borrower
A second borrower on a loan who shares equal responsibility for repayment of the loan.
Co-Mortgagor
A second borrower who signs a mortgage loan with a mortgagor. The co-mortgagor's income, assets and debts are combined with the mortgagor's for underwriting and ratio analysis purposes.
Co-Signer
One who agrees to assume a debt obligation if the principal borrower defaults on mortgage payments. A co-signer assumes only personal liability and has no ownership interest in the property; his or her income and obligations are used in the underwriting process to reinforce the credit of the primary borrower.
Collateral
Anything that a bank accepts as security against the debtor's not repaying a loan. If the debtor fails to repay the loan, the bank is allowed to keep the collateral. Collateral is most commonly in the form of real estate (e.g., a home).
Combined Monthly Housing Expense
Monthly expenses for the individual's primary residence, which include rent or mortgage payments, other financing, hazard and flood insurance, mortgage insurance, real estate taxes, utilities and homeowner association dues.
Commitment Fee
Any fee paid up front (usually by an individual builder or developer) to the lender for the purpose of holding mortgage funds for a specified date.
Commitment Letter
A written agreement between the lender and the borrower stating the terms under which the lender agrees to loan money to the borrower.
Community Home Buyer's Program
An alternative financing option that allows households of modest means to qualify for mortgages using nontraditional credit histories, 33 percent housing-to-income and 38 percent debt-to-income ratios, and the waiver of the usual two payments cash reserves at closing.
Community Home Improvement Mortgage Loan
An alternative financing option that allows low- and moderate-income home buyers to obtain 95 percent financing for the purchase and improvement of a home in need of modest repairs.
Community Land Trust Mortgage Loan
An alternative financing option that enables low- and moderate-income home buyers to purchase housing that has been improved by a non-profit Community Land Trust, and to lease the land on which the property stands.
Comparables (Comps)
Properties used to determine the value of a specific property for comparative purposes in the preparation of an appraisal.
Compensating Factors
Positive characteristics about an applicant's credit, employment history, etc. that contribute to a loan being a sound risk or investment.
Compound Interest
Interest calculated not only on the original principal, but also on the interest already accrued.
Condemnation
Taking private property for a public use with compensation to the owner under eminent domain. Used by governments to acquire land for streets, schools, freeways, etc and by utilities to acquire necessary property.
Condemnation
Declaring a structure unfit for use because of violations in housing codes or other reasons.
Conditional Commitment
A written document provided by a lender agreeing to make a loan provided certain conditions are met prior to closing.
Condominium
Individual ownership of a dwelling unit and an individual interest in the common areas and facilities which serve the multi-unit project.
Conforming Loan
Generally, a mortgage loan under $203,150. Qualifying ratios and underwriting methods are standardized to a large degree.
Consideration
Anything of value given to induce another to enter into a contract. Earnest money deposit on a sales contract is consideration.
Construction loan
A short term loan to pay for the construction of buildings or homes. These loans typically provide periodic disbursements to the builder as each stage of the building is completed. When construction is completed a take-out or permanent loan is used to pay off the construction loan.
Consumer Credit
Credit owed by an individual that is not secured by real estate.
Contingency
Conditions which must be satisfied before the buyer can close the purchase of a property. Contingencies are generally outlined in the purchase contract between the buyer and seller.
Contract
An agreement between competent parties to do or not do certain things for consideration.
Contract Sale or Deed
A real estate installment selling arrangement where the buyer may occupy the property but the seller retains the title until the agreed upon sales price has been paid. Also known as an installment land contract.
Conventional Loan
Any mortgage loan other than a VA or an FHA loan. A convention loan may be conforming or non-conforming.
Conventional Mortgage
Any mortgage that is not insured or guaranteed by the federal government.
Conversion Clause
A provision in some Adjustable Rate Mortgages that permit converting the ARM to a fixed rate loan under specified conditions at a predetermined time. Sometimes available for an additional cost.
Convertible ARMs
Some variable loans come with options to convert them to a fixed loan based on a pre-determined formula, during a given time period. For example the 1 yr t-bill adjustable may be converted to a fixed during the first five years on the adjustment date. The means that you could convert during the 13th, 25th, 37th, 49th and 61st months of the loan.
Conveyance
The transfer of title of real from one party to another.
Cooperative (Co-op)
An apartment building or a group of dwellings owned by a corporation, the stockholders of which are the residents of the dwellings. It is operated for their benefit by their elected board of directors. In a cooperative, the corporation or association owns title to the real estate. A resident purchases stock in the corporation which entitles him to occupy a unit in the building or property owned by the cooperative. While the resident does not own his unit, he has an absolute right to occupy his unit for as long as he owns the stock.
Cosmetic Repair
Repairs that improve the appearance of the property and are considered aesthetically pleasing to the eye.
Cost Approach to Value
A valuation approach in which the value of a property is determined by computing the replacement value of improvements, depreciation and the value of the land.
Coupon Book
A book of pre-printed coupons furnished to the borrower. One coupon is returned each month with a check or money order, enabling the mortgage servicer to identify the payment by name, loan number and type of loan.
Covenant
A clause in a mortgage that obligates or restricts the borrower and which, if violated, can result in foreclosure.
Credit Authorization Letter
A letter signed by the borrower that authorizes a lender to conduct a credit investigation.
Credit Bureau
A company that collects and organizes information about an individual's credit and payment habits. The three national credit bureaus are Experian, TransUnion and Equifax.
Credit Card
A plastic card that gives access to a line of credit. Users are limited in how much they can charge, but they are not required to repay the full amount each month. Instead the balance (or "revolve") accrues interest with only a minimum payment due.
Credit Depth
The number of years a borrower has had established credit. This information shows up on the borrower's credit report.
Credit History
The history of whether the borrower has met financial obligations on time in the past.
Credit Length
The length of time a borrower has had established credit.
Credit Limit
The maximum amount of money a borrower can access in a credit account.
Credit Rating
A banks evaluation of whether a person is suitable to receive credit. Credit ratings are based on an individual's character, capacity to repay, and capital.
Credit Report
A detailed record of your credit history maintained by one of three main US credit reporting agencies. Think of it as a file folder that holds information about your financing activities. When you apply for a loan, the lender requests your report from the agencies to understand if you are capable of handling more credit. The lender will then send the agencies details about that particular transaction. When you open up a new credit card, make a payment or miss a payment, all that information is added to your folder.
Credit Score
A numerical value lenders use when assessing whether they are willing to offer you credit. Lenders and financing companies take a variety of factors into consideration when making that decision, but a credit score gives them a fast, fairly objective indication of your credit risk. One of the most commonly used scores is the Fair, Isaac & Co., or FICO, score. This score is built from both the positive and the negative information found in your credit report.