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Mortgage Dictionary
By Robert Irwin, Global Home Loans & Finance

Select the first letter of the term you wish to find:
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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.

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.).

Caveat Emptor
A legal term meaning "let buyer beware". The buyer must examine the property and buy at his/her own risk. 
Example : A property may be offered in an "as is" condition with no expressed or implied guarantee of quality or condition. 

CC&Rs - 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.

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 Reasonable Value (CRV)
An appraisal performed by an 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 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 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.

Chain of Title 
The chronological order of conveyance of a parcel of land from the original owner to the present owner. 
Example : An abstractor can research title to property going back to the date that the property was granted to the United States. 

Clear Title
A marketable title, free of clouds and disputed interests. Most lenders require a clear title prior to closing. 

1. The act of transferring ownership of a property from seller to buyer in accordance with a sales contract. 
2. The time when a closing takes place. 

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.

Non-recurring costs are one time transactional costs which include 
* Discount and origination points 
* Lender fees - underwriting, processing, document preparations, flood certificate, tax service, wire transfer, courier, etc. 
* Title insurance fees 
* Escrow, attorney or closing agent fees 
* Recording fees 
* Inspection and appraisal fees 
* Real estate brokerage commissions 

Recurring fees are costs associated with owning the property and they recur month after month. These costs may include hazard insurance, interest, property taxes, mortgage insurance (PMI), and association fees. A pro-rated amount of these fees may have to be paid at closing including

* Pre-paid interest - interest charges from the date of closing to the end of the month 
* Property taxes if due 
* Hazard insurance, fire insurance or homeowner's insurance has to be paid for one year 
* Mortgage insurance (PMI) - may be required if the loan amount is more than 80% of the value of the property. In the past a whole year of PMI had to be paid up front, however in recent years many PMI companies only require 1-2 months up front. Mortgage insurance premiums are normally paid every month with the loan payment
* Impound account may need money to be set up for future payments 

Cloud on Title 
An outstanding claim or encumbrance that, if valid, would affect or impair the owner's title. Compare with clear title. 

A written document provided by a lender to agreeing to make a loan on specific terms to a borrower or builder. 

1. 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.
2. 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. 

Individual ownership of a dwelling unit and an individual interest in the common areas and facilities which serve the multi-unit project.

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.

Anything of value given to induce another to enter into a contract. Earnest money deposit on a sales contract is consideration. 

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.
Example : The buyer has 14 days to remove the property contingency under the sales contract. In this case the buyer has 14 days to inspect the property and request the seller to perform repairs. If the buyer is not satisfied with the condition of the property or if the buyer and the seller cannot agree on repairs, the buyer may back out of the contract with no penalty. After 14 days the buyer no longer has the right to back out with no penalty as a result of a problem with the condition of the property. 

An agreement between competent parties to do or not do certain things for consideration. 
Example : To have a valid contract for the sale of real estate there must be : 

1. an offer 
2. an acceptance 
3. competent parties 
4. consideration 
5. legal purpose 
6. written documentation 
7. description of the property 
8. signatures by principals or their attorney-in-fact 

Contract of Sale
Same as the Agreement of Sale 

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.
Example : John sells Mary a house. Mary has to put $10,000 and pay $1,000 per month for 24 months, after which time she will receive title to the property. 

Conventional Loan
Any mortgage loan other than a VA or an FHA loan. A convention loan may be conforming or non-conforming. 

The transfer of title of real from one party to another. 

Co-op - cooperative
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.

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-year tbill 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 61th months of the loan.

Credit Report
A report detailing a borrowers credit history including payment history on revolving accounts (eg. credit cards) and installment accounts (e.g.. car loan). A credit report also includes information found from public records including tax liens and judgements.

A written document by which title to real property is transferred from one owner to another. The deed should contain an accurate description of the property being conveyed, should be signed and witnessed according to the laws of the State where the property is located, and should be delivered to the buyer at closing.

Deed of Trust
Used in many states in lieu of a mortgage to secure the payment of a note. In a deed of trust there are three parties - the borrower, the trustee, and the lender, (or beneficiary). In such a transaction, the borrower transfers the legal title for the property to the trustee who holds the property in trust as security for the payment of the debt to the lender or beneficiary. If the borrower pays the debt as agreed, the deed of trust becomes void. If, however, he/she defaults in the payment of the debt, the trustee may sell the property without a court proceeding.

Deed Restriction
A clause in a deed that limits the use of land.
Example : A deed might require that a road cannot be built on the land. 

Failure to meet legal obligations in a contract - such as the failure to make the monthly mortgage payment. 

Defective Title
Any recorded instrument that would prevent a grantor/seller from giving a clear title. 
Example : The seller has a contractor lien on the property that was filed when he/she failed to pay the contractor for the kitchen remodel. The seller may obtain clear title by paying the contractor and removing the lien.

Deficiency Judgment
Personal claim against the debtor when the sale of foreclosed property does not yield sufficient proceeds to pay off the mortgages, accrued interest, legal fees, etc.

Decline in the value of a house due to wear and tear, obsolescence, adverse changes in the neighborhood, or any other reason. 

Discount Points
Fees paid to a lender to reduce the interest rate. 

Documentary Tax Stamps
Stamps affixed to a deed showing the amount of transfer tax. 

The rights of a widow or child to part of a deceased husband's or fathers property. 

The amount paid for the purchase of a property in addition to the mortgage, but not including any closing costs. 
Example : John buys a house for $100,000 and obtains a loan for $80,000. His downpayment is $20,000. 

Due on Sale Clause
A clause in the Deed of Trust or Mortgage that states that the entire loan is due upon the sale of the property. 

Dragnet Clause
A provision in a mortgage that pledges several properties as collateral. A default in the mortgage could lead to foreclosure proceedings on any of the properties in the dragnet.

Select the first letter of the term you wish to find:
[ A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z ]

Robert Irwin