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.

Limits on changes in ARM interest rates or monthly payments, either in an adjustment period or over the life of the loan.

Caps (Payment)
Consumer safeguards may limit the amount monthly payments on an adjustable-rate mortgage may change. Because they do not limit the amount of interest the lender is earning, they may cause negative amortization.

A refinance for more than the balance of the original mortgage, with the extra money is taken out of the equity in the property.

Cashier’s check (or bank check)
A check whose payment is guaranteed because it was paid for in advance and is drawn on the bank’s account instead of the customer’s.

See Covenants, Conditions and Restrictions.

The maximum allowable interest rate of an adjustable-rate mortgage.

Certificate of eligibility
Document issued by the Veterans’ Administration to qualified veterans that entitles them to VA guaranteed loans. This certificate can be obtained through local VA office by submitting form DD-214 (Separation Papers) and VA form 1880 (request for Certificate of Eligibility).

Certificate of occupancy
Document issued by local government agency stating that a property meets the requirements of health and building codes.

Certificate of reasonable value (CRV)
A property appraisal performed by a VA-approved appraiser that establishes the limit on the principal of the VA loan.

Certificate of title
Written opinion of the status of title to a property, given by an attorney or title company. This certificate does not offer the protection given by title insurance.

Certificate of veteran status
Document given to veterans or reservists who have served 90 days of continuous active duty (including training time) which enables them to obtain lower down payments on certain FHA-insured loans. Obtainable through local VA office by submitting form DD-214 (Separation Paper) with form 26-8261A (request for Certificate of Veteran Status).

Certified check
A check drawn on the issuer’s account for funds that have been segregated by the bank, guaranteeing payment.

See Consumer Financial Protection Bureau.

Chain of title
The chronological order of conveyance of a property from the original owner to the present owner.

Clear title
A marketable title, free of clouds and disputes.

Closing (or settlement)
Meeting between the buyer, seller and lender or their agents at which property and funds legally change hands.

Closing costs
Fees incurred in a real estate or mortgage transaction and paid by borrower and/or seller during a mortgage loan closing. These typically include a loan origination fee, discount points, attorney’s fees, title insurance, appraisal, survey and any items that must be prepaid, such as taxes and insurance escrow payments. The cost of closing is usually about 3 to 6 percent of the mortgage amount.

Closing statement
A financial disclosure statement that lists the funds received and expected at the closing.

Cloud on title
An outstanding claim or encumbrance that, if valid, would affect or impair the owner’s title.

See Combined loan-to-value.

See Cost of funds index.

Assets that back a mortgage loan.

Combined loan-to-value (CLTV)
The ratio of the total mortgage liens against the subject property to the lesser of either the appraised value or the sales price.

Money paid to a real estate agent or broker by the seller (usually 6 to 7 percent of a home’s sale price).

A formal offer by a lender to make a loan under certain terms or conditions to a borrower.

A form of property ownership in which the homeowner holds title to an individual dwelling unit and an interest in common areas and facilities of a multi-unit project.

Conforming loan
A mortgage loan under the maximum amount of loans that FNMA and FHLMC are legally allowed to buy. Maximum loan amount varies by county.

Consumer Financial Protection Bureau (CFPB)
A federal agency that enforces laws that protect consumers of financial products and services such as mortgages, credit cards and deposit accounts.

A condition that must be satisfied before a contract is legally binding before a sale can close.

Contract of sale
The agreement between the buyer and seller on the purchase price, terms and conditions of a sale.

Conventional loan
A mortgage not insured by the FHA or guaranteed by the VA.

Conversion clause
A provision in some ARMs allowing you to change an ARM to a fixed-rate loan, usually after the first adjustment period. The new fixed rate is set at current rates, and there may be a charge for the conversion feature.

Conversion option
Many “short-term” ARM products feature a conversion option. This option allows a consumer, subject to certain restrictions, to convert the loan from an adjustable to a fixed-rate mortgage.

Convertible ARMs
ARMs with the option of conversion to a fixed loan during a given time period.

The transfer of a deed or possibly a lease or mortgage.

Cost of funds index (COFI)
An index of the weighted-average interest rate paid by savings institutions for sources of funds, usually by members of the 11th Federal Home Loan Bank District.

Covenants, conditions and restrictions (CC&Rs)
A document defining the use, requirements and restrictions of a property.

Credit report
A report detailing the credit history of a prospective borrower, used when determining creditworthiness.

Credit risk
The possibility that the borrower may default on financial obligations.

See Certificate of reasonable value.