Mortgage and Real Estate Terms – C

CAPS – consumer safeguards for adjustable rate mortgages that limit the amount monthly payments can increase. An interest rate cap limits the amount the interest can change, while a payment cap limits the increase in monthly payment to a specific dollar amount.

CASH FLOW – the amount of money you have available after monthly debt-servicing.

CASH OUT SECOND MORTGAGE – to turn some of your home’s equity into cash through a home equity loan; this is to use the financial power in your house as an investment vehicle in addition to a “home” for you and your family.

CASH OUT REFINANCE – a first mortgage refinance transaction in which the amount of money received from the new loan, exceeds the total of the money needed to repay the existing mortgage(s) plus the closing costs of the new loan. In other words, a refinance transaction in which the borrowers receive additional cash, which is used for any lawful purpose.

CHAIN OF TITLE – a history of the documents which have transferred title to a parcel of real property, from the original owner to the present owner.

CLOSING – the event of getting all paperwork appropriately recorded in the official County Recorders office, for the County in which the real property is located. A purchase transaction, the meeting between the buyer, seller and lender (or their agents) where the property and funds legally change hands. Also called settlement.

CLOSING COSTS – the costs and fees associated with obtaining your mortgage that are assessed at the closing or settlement. “Closing Costs” normally are itemized and charged per item (except for the origination and/or discount POINTS), they are usually billed by outside non-affiliated vendor/suppliers to the transaction. They often can include charges and fees for escrow, legal & title insurance, notary, tax service and flood certification fees, underwriting, credit report, processing, document preparation, photo inspection, real estate appraisal, appraisal review, administration fees, courier, wire transfer fees, recording fees, warehouse fee, insurance, administration fees, taxes and other fees. These can easily average $2,300 or more per transaction, depending on the type and size of your loan. There’s No Free Lunch – there’s a lot of vendor/suppliers involved with residential real estate mortgage loans.** SEE ‘POINTS’ AND ‘GOOD FAITH ESTIMATE’ **

CLOUD ON TITLE – any condition revealing in a title search that adversely effects the title to the real property. Usually a ‘cloud on title’ will require some legal action to clear up the problem, i.e.: a deed, release or other recorded document.

COLLATERAL- the real property offered as security for a loan.

COMBINED LTV – the way a lender calculates the (C)LTV on a home equity loan; it is based on the sum of the debts on both mortgages, compared to the fair market value of your home. Up to 80% is common, above that percentage costs and fees paid can be a bit higher.

COMMON AREA – an area owned by the owners or tenants of a condominium complex, or subdivision for the common use of residents; i.e.: clubhouse, pool, green belt areas.

COMMUNITY PROPERTY – in some states, a form of ownership under which property acquired during a marriage is presumed to be owned jointly, unless acquired as separate property of either spouse. CO-MORTGAGOR – a second borrower, who signs a mortgage loan with a mortgagor. The co-mortgagor’s credit history, income, assets, and debts are combined with the mortgagor’s for underwriting and ration analysis purposes. The co-mortgagor must also hold title to the property.

COMPARABLES – properties used for comparative purposes in the appraisal process, that have similar characteristics to the subject property. Also referred to as “comps.”

CONDITIONS, COVENANTS AND RESTRICTIONS (CC&Rs) – a recorded document stating the specific conditions that run concurrently with the land.

CONDOMINIUM – a form of real property ownership whereby the purchaser receives title to the interior space of a unit, in a multi-unit structure and a proportional interest in common areas. The size of each unit is measured from the interior surfaces (exclusive of paint and other finishes of the exterior walls, floors and ceiling (air space).

CONFORMING AND NON-CONFORMING LOANS – types of loans available to different categories of borrowers. Conforming loans follow strict guidelines for eligibility as to loan sizes, credit score, rates, income and residence stability, savings and reserves habits etc. Non-conforming loans fall outside of the eligibility guidelines established for conforming lending. These may include bad credit mortgage financing alternatives.

COVENANT – a legally enforceable promise or restriction in a mortgage. For example, the borrower may covenant to keep the property in good repair, and adequately insured against fire and other casualties. A breach of a covenant in a mortgage usually creates a default as defined by the mortgage and can be the basis for foreclosure. CONVEY – the act of transferring title to real property from one party to another.

COOPERATIVE (CO-OP) – in real estate, a form of multiple ownership in which a corporation or business trust entity holds title to a property (usually an apartment complex), and grants occupancy rights to shareholder tenants through proprietary leases. Also called co-ops in many areas. CREDIT RATING – a level assigned to you in determining your eligibility for loans based on your record of payment on financial obligations, your income level, and the amount of available collateral.

CREDIT REPORT – a report that documents a borrower’s credit history and current status, published by three credit repositories. Pursuant to the Federal Fair Credit Reporting Act (formerly Title VI CCCP) borrowers can obtain a copy of their credit report from the credit repository facility (NOT from a lender or loan agent/ banker) and examine their own credit report. A borrower has rights to view their own individual and personal report run only through the credit repositories, not a potential credit grantor. No one in the lending cycle is lawfully allowed to give you a copy of it or let you view it. Contact the “bureaus” (800/685-1111, 800/682-7654, 800/888-4213), they have toll-free telephone numbers, websites, and they’re responsive. PLUS if there are errors, only they can fix them – and by law they MUST. CREDIT SCORES – the three major credit repositories Experian, TransUnion, and Equifax have a score ranking level assigned to each customer in their credit files. This “score” is their version of who’s more, and who’s a less risky loan candidate. All three are different, different amounts, different numbers, and they are compiled from different ingredients. The “math” they use is their conclusion as to the “risk in advancing credit to a particular individual” — their opinions differ. These scores can change daily, and sometimes in a major way at month end as well. If you heard one of your three “numbers” (scores) from somebody last week, although it could still be “close” to that number now, actually it means nothing today to a new lender! Most lenders and loan bankers utilize the middle score out of the three (but many of the newer funding programs use the “primary repository” instead), for the primary income earner (the potential loan individual who earns the most money). After more than 30 years of computerized study (visit the inventor of FICO “scores”) and millions of borrowers tested and tracked, it has been scientifically shown that a medium score at 600, means the lender will lose money on one out of every eight loans it makes. A score of 700 for example, means the lender will lose money on one out of every 1,293 loans it makes! If YOU were a lender and had the opportunity to make all that “interest” (or not), what score would you want from customers that YOU made loans to with your own money??

CREDITWORTHINESS – your credit history, which contains information about your borrowing habits and money-management skills, and which determines a lender’s decision about what level “risk,” or credit grade, to assign you – or even whether the loan should be made.