Glossary -C-

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call option: A mortgage provision that gives the mortgagee the right to call the mortgage due and payable at the end of a specified period for whatever reason.

cap: Provision of an adjustable-rate mortgage (ARM) that limits how much the interest rate or mortgage payments may increase or decrease at any one time.

capital gain: The profit on the sale of an appreciated property that is taxable.

capital improvement: A structure erected as a permanent improvement to real property that increases its value and useful life.

cash-out refinance: A refinance transaction where the amount of money received from the new loan is more than the amount of the money needed to repay the existing first mortgage, closing costs, points, and the total required to satisfy any existing subordinate mortgage liens. This transaction will net the borrower additional cash that can be utilized for any purpose.

caveat emptor: A phrase meaning let the buyer beware.

ceiling: A lifetime limit by which an adjustable-rate mortgage (ARM) may never be raised.

Certificate of Eligibility: A document issued by the federal government stating a veteran's eligibility for a Department of Veterans Affairs (VA) mortgage.

Certificate of Occupancy: A document issued by the local government certifying that a property meets the standards needed for occupancy.


Certificate of Reasonable Value (CRV): A document issued by the Department of Veterans Affairs (VA) that determines the maximum value and loan amount for a VA mortgage.

certificate of title: A statement supplied by a title company or an attorney stating that the present owner legally holds the title to a piece of real estate.

chain of title: A history of all of the documents that transfer title to a piece of property, from the earliest existing document up to the most recent document.

change frequency: The frequency (in months) of payment and / or interest rate changes in an adjustable-rate mortgage (ARM).

chattel: A term for personal property.

clear title

A title that is free of liens or legal question marks as to the proper ownership of the property.

closing cost item: An amount that a homebuyer pays at closing for a single service, tax, or product. Closing costs are made up of itemized closing costs such as origination fees and attorney's fees. Many closing cost items are listed as numbered items on the HUD-1 statement.

closing costs: One-time charges (in addition to the price of the property) incurred by buyers and sellers in transferring ownership of a property. Closing costs usually include origination fees, attorney's fees, taxes, an escrow amount, and charges for obtaining title insurance and a survey.

closing statement: The final statement of costs incurred to close on a loan or to purchase a home. Also referred to as the HUD1.

cloud on title: Any conditions uncovered by a title search that negatively affect the title to real estate. Usually clouds on title can't be removed except by a quitclaim deed, release, or court action.

collateral: Any asset (car, home, land, boat) that guarantees a loan's repayment. The borrower can lose the asset if the loan is not repaid as per the terms of the loan contract.


collection: Any effort to bring a delinquent mortgage current and to file the necessary notices to proceed with foreclosure if necessary.

co-maker: Any person who signs a promissory note along with the borrower. A co-maker's signature guarantees that the loan will be repaid, with the borrower and the co-maker being equally responsible for a loan repayment.

commission: The fee charged for a broker's services for negotiating a real estate or loan transaction. The commission is usually a percentage of the sales price of the property or loan.

commitment letter: A written promise by a lender stating the terms under which it will lend money to a homebuyer. Also known as a "loan commitment."

common areas: Those portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD) that are used by all of the unit owners, who share in the expenses of their operation and maintenance. Examples of common areas are swimming pools, tennis courts, other recreational facilities, building corridors and parking lots.

Community Home Improvement Mortgage Loan: A financing option that permits low- and moderate-income home buyers to obtain 95% financing for the purchase and improvement of a home with repair needs. The repairs can amount to as much as 30% of the appraised value.

community property: A form of ownership in some western states under which property acquired while married is presumed to be jointly owned unless it was acquired as a separate property of either spouse.

comparables: An abbreviation for comparable properties. They are recently sold similar properties that are used by an appraiser to estimate the fair market value of another property.

comparative market analysis: Method of determining home values by utilizing a combination of comparables, property that is now on the market and property that failed to sell.

conditional commitment: A lender's agreement to make a loan subject to the fulfillment of specific conditions.

conditional offer: A purchase offer on a piece of property subject to specified occurrences such as securing a loan or the sale of another home.

condominium: A real estate project in which each unit owner has individual ownership to a unit in a building, but shared ownership in the common areas of the project.

condominium conversion: Changing the ownership of an existing building (usually a rental property) to the condominium form of ownership.

consideration: Something of value that is given by one party to another to convince them to enter into a contract.

construction loan: A short-term loan used to finance the cost of construction. The lender makes periodic payments to the builder as the work progresses.

consumer reporting agency: An organization that prepares reports used by lenders to determine a potential borrower's credit history.

contingency: A condition included in a contract that must be met before a buyer purchases a home.

contract: A legally enforceable agreement to do or not to do a certain thing.

contract for deed: Method of selling where the buyer receives possession but the seller retains the title.

conventional mortgage: A mortgage loan between a lender and a borrower that is not insured or guaranteed by the federal government.

convertibility clause: A provision in an adjustable-rate mortgage (ARM) that gives the borrower the option to change the ARM to a fixed-rate mortgage at certain timeframes after the loan's origination.

convertible ARM: An adjustable-rate mortgage (ARM) that can be changed to a fixed-rate mortgage under certain conditions.

cooperative: A form of multiple ownership where the residents of a multi-unit housing complex own shares in the cooperative corporation that owns the property, which gives each resident the right to occupy a certain unit.

cost basis: An accounting figure that approximates the cost of a property. The figure includes the original cost of the property, expenses incurred during the purchase, and permanent improvements less depreciation claimed on tax returns.

cost of funds index (COFI): An index used to determine interest rate changes for some adjustable-rate mortgages (ARM). The index is determined by the weighted-average cost of savings, borrowings, and advances of the 11th District members of the Federal Home Loan Bank of San Francisco.

covenant: A mortgage clause that obligates, or restricts, a borrower and if violated, can force the foreclosure of a loan.

credit: An agreement where a borrower receives something of value for promising to repay the lender at a future date.

credit history: The record of an borrower's open and fully repaid debts. A credit history helps lenders determine if a potential borrower has a history of repaying debts on time.

credit report: A document of an individual's credit history that is prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness. See merged credit report.

credit repository: An organization that gathers, records, updates, and stores financial and public records information about the payment records of individuals who are being considered for credit.

YOUR FRIENDLY COLORADO MORTGAGE BROKER SINCE 1977