Sand Dollar Title Group, Inc.

Terminology
Here Are Some Helpful Terms Used Throughout The Real Estate, Mortgage, and Title Processes.

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

Call Option
Similar to the acceleration clause.

Capital Gains
Profit earned from the sale of real estate. The new tax code may not tax the the first $500,000 of profits from the sale of a home (married filing jointly, $250,000 single) if you have occupied the home for at least 2 years. Consult your tax advisor.

Caps

Caps
Limit on how much the interest rate or the monthly payment can change, either at each adjustment or during the life of the mortgage. All ARMs have interest rate caps to protect you from enormous increases in monthly payments. A lifetime cap limits the interest rate increase over the life of the loan. Lifetime caps can vary by lender, but most ARMs have caps of 5% or 6%. A periodic or adjustment cap limits how much your interest rate can rise at one time. Generally, a 6 month ARM will have a cap of 1% while a 1 year ARM will have a 2% cap. Periodic and lifetime caps are quoted as two numbers as in 2/6 which would mean that periodic cap is 2% and the lifetime cap is 6%. Examples: 1. The initial interest rate is 5.5%, the index is 8%, and the margin is 2.875%, then the new interest rate = 8% + 2.875% = 10.875%. If the lifetime cap is 5% then the actual new interest rate will be 5.5% + 5% = 9.5%. 2. The initial interest rate is 6%, the index is 7%, and the margin is 3%, then the new interest rate = 7% + 3% = 10%. But, If the periodic cap is 1% then the actual new interest rate will be 6% + 1% = 7%. ARMs which have an initial fixed period -- 30/3/1, 30/5/1, 30/7/1 and 30/10/1 -- can have also first adjustment cap. It limits the interest rate you will pay the first time your rate is adjusted. These ARMs are quoted as three numbers as in 5/2/5 which would mean that the first adjustment cap is 5%, adjustment cap thereafter is 2%, and the lifetime cap is 5%. Two-Step loans -- 5/25 and 7/23 -- have only one adjustment after the first five or seven years of its term. They are quoted with a single first adjustment cap.

Carry Back
In order to sell his home, a seller may be willing to "carry back" a second trust deed/mortgage. This would mean that the buyer of the home would obtain a first trust deed from a traditional lender for perhaps 75% or 80% of the purchase price, and obtain a second mortgage directly rom the seller of the home for an additional five or ten percent of the purchase price. The "loan-to-value of these mortgages can vary, as well as the terms. It is common for the second trust deed to require "interest only payments (which do not pay towards any of the principal) and for the loan to be totally "due and payable" after a term of five years. Then the buyer may have to refinance in order to pay off the loan, obtain a new second trust deed elsewhere, or pay off the loan from savings. The major reason for obtaining a "seller carry back" is that the lower loan-to-value ratio on the first mortgage will make it easier to qualify for the loan, and there will be no need for mortgage insurance.

Cash out refinance
A refinance on a home that you own where the loan amount has extra money left after paying off the existing purchase money mortgages and closing costs. Usually 1-2% of the loan amount can be given to you at closing loan before is it considered a cash out refinance.

Certificate of Deposit
A time deposit held in a bank which pays a certain amount of interest to the depositor.

Certificate of Deposit Index
One of the indexes used for determining interest rate changes on some adjustable rate mortgages. It is an average of what banks are paying on certificates of deposit.

Certificate of Eligibility
A document issued by the U.S. Department of Veterans Affairs. It is required when applying for VA loans.

Certificate of Occupancy
Document which is issued by local governments that states a property meets the local building standards for occupancy. Required for new construction and sometimes also for the sale of an existing property.

Certificate of Reasonable Value
An appraisal by a VA approved appraiser which estimates the property's current market value.

Chain of Title
An analysis of the transfers of title to a piece of property over the years.

Clear Title
A title/deed that free of clouds and disputed interests.

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

Closing
This has different meanings in different states. In some states a real estate transaction is not consider "closed" until the documents record at the local recorders office. In others, the "closing" is a meeting where all of the documents are signed and money changes hands.

Closing Costs
The numerous expenses which buyers and sellers normally incur to complete a transaction in the transfer of ownership of real estate. These costs are in addition to price of the property and are items prepaid at the closing day. This is a typical list: BUYER'S EXPENSES Recording Deed and Mortgage Escrow Fees Attorney's Fee (optional) Title Insurance Appraisal Endorsements to Title 1% PA Transfer Tax Pre-Paid Property tax, sewer, water, trash, adjustments Points and other loan fees Homeowners/Hazard Insurance Policy for 1st year SELLER'S EXPENSES Attorney's Fee (optional) Real Estate Commission 1% PA Transfer Tax Satisfaction of liens Express mail for lien payoff(s) The agreement of sale negotiated previously between the buyer and the seller may state in writing who will pay each of the above costs.

Closing Day
The day on which the formalities of a real estate sale are concluded. The deed is generally prepared for the closing by an attorney and this cost charged to the buyer. The buyer signs the mortgage, and closing costs are paid. The final closing merely confirms the original agreement reached in the agreement of sale.

Closing Statement
See Settlement Statement.

Cloud (On Title)
An outstanding claim or encumbrance which adversely affects the marketability of title.

Co-Borrower
An additional individual who is both obligated on the loan and is on the title to the property.

Collateral
In a home loan, the property is the collateral. The borrower risks losing the property if the loan is not repaid according to the terms of the mortgage or deed of trust.

Collection
When a borrower falls behind, the lender contacts them in an effort to bring the loan current. The loan goes to "collection." As part of the collection effort, the lender must mail and record certain documents in case they are eventually required to foreclose on the property.

Commission
Most salespeople earn commissions for the work that they do and there are many sales professionals involved in each transaction, including realtors, loan officers, title representatives, attorneys, escrow representative, and representatives for pest companies, home warranty companies, home inspection companies, insurance agents, and more. The commissions are paid out of the charges paid by the seller or buyer in the purchase transaction. Realtors generally earn the largest commissions, followed by lenders, then the others.

Commission
Fee paid to a real estate agent or broker by the seller as compensation for finding a buyer and completing the sale. Usually it is a percentage of the sale price--6 to 7 percent on houses, 10 percent on land.

Commitment
A written agreement between a lender and a borrower to loan money on specific terms or conditions.

Common Area Assessments
In some areas they are called Homeowners Association Fees. They are charges paid to the Homeowners Association by the owners of the individual units in a condominium or planned unit development (PUD) and are generally used to maintain the property and common areas.

Common Areas
Those portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD) or condominium project's homeowners' association (or a cooperative project's cooperative corporation) that are used by all of the unit owners, who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc.

Common Law
An unwritten body of law based on general custom in England and used to an extent in some states.

Community Property
In some states, especially the southwest, property acquired by a married couple during their marriage is considered to be owned jointly, except under special circumstances. This is an outgrowth of the Spanish and Mexican heritage of the area.

Comparable Sales
Recent sales of similar properties in nearby areas and used to help determine the market value of a property. Also referred to as "comps."

Condominium
A real estate project in which each unit owner holds title to a unit in a building, an undivided interest in the common areas of the project, and sometimes the exclusive use of certain limited common areas. The condominium may be attached or detached. The homeowners association dues are included in the total monthly mortgage payment for qualifying purposes.

Condominium Conversion
Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.

Condominium Hotel
A condominium project that has rental or registration desks, short-term occupancy, food and telephone services, and daily cleaning services and that is operated as a commercial hotel even though the units are individually owned. These are often found in resort areas like Hawaii.

Construction loan
A short term loan to pay for the construction of buildings or homes. These loans usually provide periodic disbursements to the builder as each stage of the building is completed. Generally followed by long term financing called a "take out" loan issued upon completion of construction.

Contingency
A condition put on an offer to buy a home; such as the perspective buyer making an offer contingent on his or her sale of a present home, or being approved for a mortgage.

Contract
An oral or written agreement to do or not to do a certain thing.

Conventional Mortgage
Any mortgage loan not insured by HUD or guaranteed by the Veterans' Administration. It is subject to conditions established by the lending institution, Fannie Mae, Freddie Mac, and State statutes.

Conversion Option
Some ARMs come with options to convert them to a fixed rate mortgage during a given time period without having to go through a refinancing, which could cost up to 5 percent or 6 percent of the loan amount. For example popular conversion options for 1 year treasury-indexed ARMs include: 1. option to convert on the third, fourth, or fifth adjustment date, i.e. during the 37th, 49th and 61st months of the loan. 2. option to convert during the first five years on the adjustment date, i.e. during the 13th, 25th, 37th, 49th and 61st months of the loan. The interest rate or points may be somewhat higher for a convertible ARM. Also, a convertible ARM may require a small fee at the time of conversion.

Convertible ARM
An adjustable-rate mortgage that allows the borrower to change the ARM to a fixed-rate mortgage within a specific time.

Conveyance
The transfer of title to the property from one party to another.

Cooperative Housing
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.

Cost of Funds Index (COFI)
One of the indexes 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 financial institutions such as banks and savings & loans, in the 11th District of the Federal Home Loan Bank.

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 History
A record of an individual's repayment of debt. Credit histories are reviewed by mortgage lenders as one of the underwriting criteria in determining credit risk.

Credit Report
A report documenting the history of how you paid back the companies you have borrowed money from, or how you have met other financial obligations.

Credit Repository
An organization that gathers, records, updates, and stores financial and public records information about the payment records of individuals who are being considered for credit.

Creditor
A person to whom money is owed.

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