A set percentage by which an ARM may adjust each pre-set period as described in the mortgage note. Caps are usually quoted as two numbers as in 2/6. The first number indicates how much a loan may change at each adjustment period while the second number indicates the percentage a loan may adjust over its lifetime. Loans like the 3/1 and 5/1 adjustable which have an initial fixed period are quoted with 3 numbers as in 3/2/6 which would mean that the first adjustment may be as much as 3%, subsequent adjustments are capped at 2% each, and the lifetime cap is 6%.
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 (i.e., mortgage payment, maintenance, and utilities).
Certificate of Eligibility
A document issued by the Veterans Administration showing the borrower is eligible to obtain a VA loan.
Certificate of Occupancy
Written authorization issued by a local municipal authority that permits occupancy of a newly constructed home.
Certificate of Reasonable Value (CRV)
An appraisal issued by the Veterans Administration showing the property’s current market value.
Also referred to as settlement. The process of finalizing the purchase or refinance of a property, including but not limited to, signing papers, disbursing money, and preparing the deed and transfer of ownership.
Fees paid by the borrower when a property is purchased or refinanced. These typically include a loan origination fee, discount points, appraisal fee, title search, title insurance, survey, taxes, deed recording fee, and credit report charge.
Closing Disclosure (CD)
Final review of costs and terms including costs paid by the buyer, seller and third parties.
Personal property pledged as security for a debt. Collateral for a mortgage is usually the property.
A written letter of agreement detailing the terms and conditions on which the mortgage company will lend money to finance a home.
Real estate that includes the separate ownership of a specified unit with undivided interest in the ownership of the common elements which are owned jointly with the other condominium unit owners.
A mortgage loan with an initial balance equal to or less than the maximum amount established by Fannie Mae and Freddie Mac.
A provision that makes the occurrence of one event dependent upon the completion of another. For example, the purchase of a home may be contingent on the seller repairing structural damages.
A mortgage neither insured by the FHA nor guaranteed by the VA.
The right of a borrower to convert an adjustable or balloon loan into a fixed rate loan.
Borrowers are rated by credit bureaus according to their credit-worthiness or risk profile. These ratings are based on various factors such as a borrower’s payment history, foreclosures, bankruptcies, and charge-offs.
A report to a prospective lender on the credit standing of a prospective borrower which is used to help determine creditworthiness. Information regarding late payments, defaults, or bankruptcies will appear on the report.