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Laguna Beach Mortgage 949-495-5885 |
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Mortgage Glossary |
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Use this glossary to look up definitions of mortgage terms. The definitions given here explain how the terms are used in the field of real estate finance. |
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Cap A limit on the amount the interest rate or monthly payment can increase in an Adjustable Rate Mortgage (ARM). |
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Capitalization A method of appraising real property by converting the anticipated net income from the property into the present value. Also called the income approach to value. |
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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.). |
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Certificate of
Eligibility A document issued by the Veterans Administration, indicating a veteran's eligibility for a VA-guaranteed loan. |
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Certificate of
Reasonable Value A document issued by the Veterans Administration, setting forth a property's current market value, based on a VA-approved appraisal. |
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Chattel Mortgage An instrument that makes personal property (chattels) security for a loan. In states that have adopted the Uniform Commercial Code, the chattel mortgage has been replaced by the security agreement. |
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Child Support Can be counted on to qualify if it is received on a regular basis and will continue for another 3 years. |
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Closing The final stage in a real estate transaction, when the loan funds are disbursed, the seller is paid the purchase price, and the buyer receives the deed; also called settlement. |
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Closing Costs Expenses incurred in the transfer of real estate, aside from the purchase price; for example, the appraisal fee, title insurance premiums, brokerage fee, and transfer taxes. Also called settlement costs. |
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Co-Borrower Someone (often a member of the borrower's family) who accepts responsibility for repayment of a mortgage loan, along with the primary borrower, to help the borrower qualify for the loan. Also called a co-mortgagor. |
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COFI Adjustable Rate Mortgage with rate that adjusts based on a Cost Of Funds Index, often the 11th District Cost of Funds. |
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Collateral Property (personal or real) accepted by a lender as security for a loan, which can be sold if the borrower fails to repay as agreed. |
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Commission The compensation paid to a real estate broker for services in connection with a real estate transaction. |
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Commitment A lender's promise to make a loan. A loan commitment may be either firm or conditional. If it is conditional, the loan will not be made unless certain conditions are fulfilled. |
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Comparables In a sales comparison appraisal, properties similar to the subject property that have recently been sold; the appraiser uses the sales price of the comparables as an indication of the value of the subject property. |
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Competitive Market
Analysis (CMA A real estate agent's estimate of the value of a listed home, based on the sales prices or listing prices of comparable homes. |
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Condition A provision in an agreement that makes the parties' rights and obligations depend on the occurrence (or nonoccurrence) of a particular event. Also called a contingency clause. |
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Condominium A condominium is a unit of a multi-unit housing structure with a proportional interest in the common areas. |
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Conforming Loan A loan made in accordance with the standardized underwriting criteria of the major secondary market agencies, Fannie Mae and Freddie Mac, and which therefore can be sold to those agencies. A loan that does not meet the Fannie Mae/Freddie Mac standards is called a nonconforming loan. |
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Consideration Something of value given to induce another to enter into a contract. An agreement is not a legally binding contract unless the parties exchange consideration. |
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Construction Loan A loan to finance the cost of constructing a building, usually providing that the loan funds will be advanced in installments as the work progresses. Also called an interim loan, because it remains in force only until construction is completed. At that point, the construction loan is replaced with a take-out loan. |
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Consumer Price Index An index that tracks changes in the cost of goods and services for a typical consumer. Formerly called the cost of living index. |
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Conventional Loan An institutional loan that is not insured or guaranteed by a government agency. |
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Convertible ARM An adjustable rate mortgage that gives the borrower the option of converting to a fixed interest rate at certain times during the first years of the loan term. |
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Cost Approach to
Value One of the three main methods of appraisal (along with the income approach and the sales comparison approach), in which an estimate of the subject property's value is arrived at by estimating the cost of replacing the improvements, then deducting the estimated accrued depreciation and adding the estimated market value of the land. |
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Credit Report A report prepared by a credit rating bureau that outlines the credit history of an individual or a business, showing the amount of debt, a record of repayment, and related information. |
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