Cap
A provision of an ARM limiting how much the interest rate or mortgage payments may increase.
Capital gains tax
A tax owed for selling something at a price that is more than the price the owner bought it for.
Capital loss
What a homeowner has if he sells his home for less money than he paid for it.
Cash reserve
A requirement of some lenders that buyers have sufficient cash remaining after closing to make the first two mortgage payments.
Clear title
A title that is free of liens and legal questions as to ownership of the property.
Closing
The meeting during which all the papers are signed (the loan is “closed”) and the house keys are turned over to the new homebuyer. Also called “settlement”.
Closing costs
Money paid by borrowers and sellers to close a mortgage loan. This normally includes origination fees, points, title insurance, survey and attorneys’ fees, and prepaid items such as insurance and taxes. Also called “settlement costs”.
Collateral or security
Property that backs up a loan. If the borrower does not pay back the loan as agreed, the lender can take the collateral. A house is collateral for a mortgage loan. A house gives security to a mortgage loan.
Collection agencies
Private businesses, hired by creditors, that try to get borrowers to make payments that are overdue.
Commission
The fee a real estate agent is paid for helping to sell a house. Usually it is based on the purchase price of the home.
Commitment letter
A formal offer by a lender stating the terms under which it agrees to loan money to a homebuyer.
Contingency
An item in a real estate sales contract stating that the contract is good only in certain cases—for instance, only if the buyer obtains financing at a certain rate or only if the seller replaces the shingles on the roof. The contingencies must be written in the contract.
Conventional mortgage
Any mortgage that is not insured or guaranteed by the federal government.
Co-signer
A person who signs loan documents, such as a mortgage note with another person. The co-signer is responsible for making payments, if the borrower does not.
Counter-offer
If a seller does not like a buyer’s offer, the seller can reject the offer and can make a new offer.
Covenant
A clause in a mortgage that obligates or restricts the borrower and which, if violated, can result in foreclosure.
Credit bureau
Also called “credit reporting agency”. A company that keeps track of people’s debts and how they repay them. The three main credit bureaus are TRW, Equifax, and Trans Union.
Credit history
The record of a person’s payment of debt, over years’ time. That record is kept by three national credit bureaus that send it to businesses, lenders, and creditors, as well as to credit-holders upon request.
Credit rating
A credit bureau’s ranking of the way a person has repaid her debts. A lender uses a loan applicant’s credit rating to decide whether or not to make the loan.
Credit report
A report of an individual’s credit history prepared by a credit bureau and used by a lender in determining an applicant’s creditworthiness.
Creditor
Any person or company that lends money (extends credit).
Creditworthy
A person with good credit, whom a lender judges will repay a loan, is creditworthy.