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B
Balloon Mortgage
A mortgage that has equal monthly payments which are insufficient to amortize the loan so that a "balloon" or lump sum payment for the remaining balance is due at the end of the term. Frequently, these mortgages contain an opportunity to refinance.

Bankruptcy
A proceeding in a federal court in which a debtor who owes more than his or her assets can relieve the debts by transferring his or her assets to a trustee. If you have had a bankruptcy in past 24 months, please call for more information.

Before-tax income
Income before taxes are deducted. Often referred to as gross income.

Bond
An interest-bearing certificate of debt with a maturity date. An obligation of a government or business corporation. A real estate bond is a written obligation usually secured by a mortgage or a deed of trust.

Breach
A violation of any legal obligation.

Bridge Loan
A form of second trust that is collateralized by the borrower's present home in a manner that allows the proceeds to be used for closing on a new house before the present home is sold.

Broker
A person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them. USA Mortgage is a mortgage broker who markets the money for over 80 different lenders.

Building Code
Local regulations that control design, construction, and materials used in construction. Building codes are based on safety and health standards.

Buy down Mortgage
A temporary buy down is a mortgage in which an initial lump sum payment is made by any party to reduce a borrower's monthly payments during the first few years of a mortgage. A permanent buy down reduces the interest rate over the life of a mortgage.

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C
Call Option
A provision in the mortgage that gives the mortgagee the right to call the mortgage due and payable at the end of a specified period for whatever reason.

Cap
A limit on the maximum amount your interest rate can increase on an adjustable rate mortgage. There are caps for the life of your loan and there are caps that limit the amount of any single adjustment. SEE PERIODIC RATE CAP AND LIFETIME RATE CAP.

Capital
1) Money used to create income, either as an investment in a business or an income property. 2) The money or property comprising the wealth owned or used by a person or business enterprise. 3) The accumulated wealth of a person or business.

Capital Expenditure
The cost of an improvement made to extend the useful life of a property or to add to its value.

Capital Improvement
Any structure or component erected as a permanent improvement to real property that adds to its value and useful life.

Cash Reserves
A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. Lenders typically require an amount of reserves equal to a predefined number of monthly mortgage payments.

Cash-out Refinance
A refinance transaction in which the amount of money received from the new loan exceeds the total of the money needed to repay the existing first mortgage, closing costs, points, and the amount required to satisfy any outstanding subordinate mortgage lien.

Certificate of Deposit
A document written by a bank or other financial institution that is evidence of a deposit plus earnings at a specified interest rate within a specified time period.

Certificate of Deposit Index
An index that is used to determine interest rate changes for certain ARM plans. It represents the weekly average of secondary market rates on six-month negotiable certificates of deposits.

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

Certificate of Occupancy (CO)
Written authorization by a local municipality or authority (typically only for newly completed or nearly completed structures) to live in the property. This typically follows an inspection to ensure compliance with local standards and codes.

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

Certificate of Title
A statement provided by an abstract company, title company, or attorney stating that the title to real estate is legally held by the current owner.

Chain of Title
The history of all the documents that transfer title to a parcel of real property, starting with the earliest existing document and ending with the most recent.

Change Frequency
The frequency (in months) of payment and/or interest rate changes in an ARM.

Chattel
Another name for personal property.

Clear Title
A title that is free of liens or legal questions as to ownership of the property.

Closing
A meeting at which a sale of a property is finalized by the buyer signing the mortgage documents and paying closing costs. Also called "Settlement."

Closing Cost Item
A fee or amount that a home buyer must pay at closing for a single service, tax, or product. Closing costs are made up of individual closing cost items such as origination fees and attorney's fees.

Closing Costs
These are costs associated with the completion of the purchase and/or financing of your property. For a property purchase, the costs may be payable by either the seller or buyer.

Closing Statement
See HUD-1 statement.

Cloud on Title
Any conditions revealed by a title search that adversely affect the title to real estate. Usually clouds on title cannot be removed except by a quitclaim deed, release, or court action.

Co-Borrower
A person who's income and creditworthiness is utilized in addition to the borrower to obtain a mortgage. This person is individually and jointly obligated to repay the mortgage and may or may not share ownership of the property.

Co-insurance
A sharing of insurance risk between the insurer and the insured. Coinsurance depends on the relationship between the amount of the policy and a specified percentage of the actual value of the property insured at the time of the loss.

Co-insurance clause
A provision in a hazard insurance policy that states the amount of coverage that must be maintained -- as a percentage of the total value of the property --for the insured to collect the full amount of a loss.

Co-Signer
See: Co-Borrower.

Collateral
An asset (such as a car or a home) that guarantees the repayment of a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract.

Commission
The fee charged by a broker or agent for negotiating a real estate or loan transaction. A commission is generally a percentage of the price of the property or loan.

Commitment Fee
A fee charged by some lenders to borrowers to attain a mortgage.

Commitment Letter
A formal offer by a lender stating the terms under which it agrees to lend money to a home buyer. Also known as a "loan commitment."

Common Area Assessments
Levies against individual owners in a condominium or planned unit development (PUD) project for additional capital to defray homeowners' association costs and expenses and to repair, replace, maintain, improve, or operate the common areas of the project.

Common Areas
Those portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD) or condominium projects homeowners' association that are used by all of the unit owners.

Common Law
An unwritten body of law based on general custom in England and used to an extent in the United States.

Community Property
In some western and southwestern 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.

Comparables
An abbreviation for "comparable properties"; used for comparative purposes in the appraisal process. Comparables are properties like the property under consideration; they have reasonably the same size, location, and amenities and have recently been sold.

Compound Interest
Interest paid on the original principal balance and on the accrued and unpaid interest.

Condominium
A Form of ownership where the dwelling units are individually owned and homeowners share ownership of common areas.

Conforming Loan
A loan that conforms to Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC) guidelines.

Consumer Handbook on Adjustable Rate Mortgages.
A disclosure required by the federal government to be given to any borrower applying for an adjustable rate mortgage (ARM).

Conventional Mortgage
A mortgage that is not insured or guaranteed by the federal government.

Convertibility Clause
A provision in some adjustable-rate mortgages (ARMs) that allows the borrower to change the ARM to a fixed-rate mortgage at specified time frames after loan origination.

Convertible ARM
An adjustable-rate mortgage (ARM) that can be converted to a fixed-rate mortgage under specified conditions.

Cooperative (co-op)
A type of multiple ownership in which the residents of a multiunit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.

Corporate Relocation
Arrangements under which an employer moves an employee to another area as part of the employer's normal course of business.

Cost of Funds Index (COFI)
An index that is used to determine interest rate changes for certain adjustable-rate mortgages. It represents the weighted-average cost of savings, borrowings and advances of the 11th District of the Federal Home Loan Bank of San Francisco.

Covenant
A clause in a mortgage that obligates or restricts the borrower and, if violated, can result in foreclosure.

Credit
An agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date.

Credit Bureau Company
A company that creates the credit reports that are utilized in determining the borrowers creditworthiness.

Credit History
A record of an individual's open and fully repaid debts. A credit history helps a lender to determine whether a potential borrower has a history of repaying debts in a timely manner.

Credit Life Insurance
A type of insurance often bought by mortgagors because it will pay off the mortgage debt if the mortgagor dies while the policy is in force.

Credit Report
A report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness.

Creditor
A person to whom money is owed.

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D
Debt
An amount owed to another.

Debt-to-Income ratio
The ratio of the borrower's total monthly obligations. This includes housing principal, interest, taxes, insurances and recurring monthly payments to monthly income. Two common debt ratio's used are the "front-end ratio" and "back-end ratio."

Deed
The legal document conveying title to a property.

Deed of Trust
The document used in some states instead of a mortgage; title is conveyed to a trustee until the loan is repaid.

Default
Failure to make mortgage payments on a timely basis or to comply with other requirements of a mortgage.

Delinquency
Failure to make mortgage payments when mortgage payments are due.

Department of Housing and Urban Development (HUD)
The U.S. Government agency that administers FHA, GNMA and other housing programs.

Discount Points
See Points

Down Payment
The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage.

Due-on-Sale Provision
A provision in a mortgage that allows the lender to demand repayment in full if the borrower sells the property that serves as security for the mortgage.

Duplex
Dwelling divided into two units, usually occupied by two different residents.