Mortgage Glossary
There are a lot of unfamiliar terms that get tossed around during the mortgage process. But don't worry, we've put together this glossary to help you get a better grasp of any terms that may be less than clear.
B
Business Days
Check with your lending institution to find out what days it considers as business days under the Truth in Lending and Electronic Fund Transfer Acts. Usually excludes weekends and holidays.
Buy-down Account
An account in which money is held so that it can be applied to the monthly mortgage payments, as each payment comes due, during the period that an interest rate buy-down plan is in effect.
Buydown
A process that allows a borrower to obtain a lower interest rate on a mortgage by paying discount points to a lender. A temporary buydown will reduce the interest rate paid during the first few years of the loan. A permanent buydown reduces the interest rate over the entire life of the loan.
C
California Bungalow
A small, one-story, compact, early-twentieth-century house.
California Ranch
A one-story, post-World War II style, ground-hugging house with a low, pitched roof.
Call Option
A provision in a home loan that gives the mortgagee the right to call the mortgage due and payable at the end of a specified time period for any reason.
Cancellation Clause
A contract provision that gives the right to terminate obligations upon the occurrence of specified events.
Cap
Refers to a provision of an adjustable rate mortgage (ARM) that limits how much the interest rate or payment can increase or decrease.
Capital
1) The net worth of a business defined by the amount by which its assets exceed its liabilities. 2) Money used to create income. 3) The money or other assets comprising the wealth at the disposal of a person or business enterprise. 4) The accumulated wealth of a business or individual.
Capital Expenditures
The cost of an improvement made to extend the useful life of a property or to add to its value.
Capital Improvement
Any component constructed as a permanent improvement to real property that increases its value and adds to its useful life.
Cash Out Refinance
A refinance loan that provides the borrower with cash that exceeds the amount required to pay off existing mortgages on the home. This additional cash can be used by the borrower for any purpose.
Certificate of Deposit (CD)
An instrument, issued by a bank or other financial institution, that is evidence of a type of savings deposit. The document includes the institution’s promise to return the deposit, plus earnings at a specified interest rate within a specified period.
Certificate of Deposit index
A rarely used index that is used to determine interest rate changes for certain adjustable-rate mortgages (ARM) plans.
Certificate of Eligibility
A document issued by the federal government certifying a veteran’s eligibility for a Department of Veterans Affairs (VA) loan.