Frontpage » Index of Financial Terms

• Closing Day
  

   

  The day on which the formalities of a real estate sale are concluded. The certificate of title, abstract, and deed are 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.

   

• Certificate of Title
  

   

  A certificate issued by a title company or a written opinion rendered by an attorney that the seller has good marketable and insurable title to the property which he is offering for sale. A certificate of title offers no protection against any hidden defects in the title which an examination of the records could not reveal. The issuer of a certificate of title is liable only for damages due to negligence. The protection offered a homeowner under a certificate of title is not as great as that offered in a title insurance policy.

   

• Certificate of Reasonable Value (VA Loans)
  

   

  An appraisal issued by the VA approved appraiser which establishes the property's current market value.

   

• Certificate of Occupancy
  

   

  Document issued by a local governmental agency that states a property meets the local building standards for occupancy.

   

• Certificate of Eligibility (VA Loans)
  

   

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

   

• Capital Gains
  

  Profit earned from the sale of real estate. The new tax code does not tax the profits from the sale of a home if the proceeds are used to buy another house costing at least as much as the sales price of the old one

• Caps (Interest Rate Caps)
  

   

  A limit on how much the interest rate or the monthly payment can change, either at each adjustment or during the life of the mortgage. Most ARMs have an interest rate caps to protect you from enormous increases in monthly payments.

   

• Buydown
  

   

  With a buydown, the seller pays an amount to the lender so that the lender can give you a lower rate and lower payments, usually for an early period in an ARM. The seller may increase the sales price to cover the cost of the buydown. Buydowns can occur in all types of mortgages, not just ARMs.

   

• Building Line or Building Setback
  

   

  Distances from the ends and/or sides of the lot beyond which construction may not extend. The building line may be established by a filed plat of subdivision, by restrictive covenants in deeds or leases, by building codes, or by zoning ordinances.

   

• Bridge Loan or Bridging Finance
  

   

  An interim loan is made to finance a buyers new residence if the buyer is unable to sell his/her current residence but needs money to close the transaction.

   

• Blanket Mortgage
  

   

  A mortgage covering at least two pieces of real estate as security for the same mortgage.

   

• Bi-Weekly Mortgage
  

   

  A mortgage which requires a payment for half the monthly amount every two weeks. As a result the loan amortizes much faster than a loan with normal monthly payments. For example, a 30 year fixed rate loan will be paid off in approximately 19 years.

   

• Binder or
  

   

  A preliminary agreement, secured by the payment of earnest money, between a buyer and seller as an offer to purchase real estate. A binder secures the right to purchase real estate upon agreed terms for a limited period of time. If the buyer changes his mind or is unable to purchase, the earnest money is forfeited unless the binder expressly provides that it is to be refunded.

   

• Balloon Mortgage
  

   

  A short-term fixed-rate loan which involves smaller payments for a certain period of time and one large payment for the entire amount of the outstanding principal. Usually they have terms of 3, 5, and 7 years.

   

• Attached Home
  

   

  A home that has one or more common walls adjoining another home. Condominiums and row houses are attached homes.

   

• Assumption of Mortgage
  

   

  An obligation undertaken by the purchaser of property to be personally liable for payment of an existing mortgage. In an assumption, the purchaser is substituted for the original mortgagor in the mortgage instrument and the original mortgagor is to be released from further liability in the assumption, the mortgagee's consent is usually required.

  
  

   

• Assumption
  

   

  The agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from the seller. The lender has to be notified and agree to the assumption. Assuming a loan can usually save a money since the buyer isn't required to pay most of the closing costs.

   

• Assumability
  

   

  When a home is sold, the seller may be able to transfer the mortgage to the new buyer. This means the mortgage is assumable. Lenders generally require a credit review of the new borrower and may charge a fee for the assumption. Some mortgages contain a due-on-sale clause, which means that the mortgage may not be transferable to a new buyer. Instead, the lender may make you pay the entire balance that is due when you sell the home. Assumability can help you attract buyers if you sell your home.

   

• Assessing Unit
  

   

  A city, county, town or village with the authority to value real property for purposes of taxation.

   

• Assessed Value
  

   

  A figure in dollars determined for tax purposes by an assessor which reflects a property's worth and which, unless exempt, is used to compute a tax dollar obligation by multiplying it by a tax rate.

   

• Appraisal
  

   

  An expert judgment or estimate of the quality or value of real estate as of a given date.

   

• Annual Percentage Rate (APR)
  

   

  A measure of the cost of credit, expressed as a yearly rate. It includes interest as well as other charges. Because all lenders follow the same rules to ensure the accuracy of the annual percentage rate, it provides consumers with a good basis for comparing the cost of loans, including mortgage plans.

   

• Amortization
  

   

  A payment plan which enables the borrower to reduce his debt gradually through monthly payments of principal.

   

• Alienation Clause
  

   

  Provision in a mortgage document stating that the loan must be paid in full if ownership is transferred.

   

• Agreement of Sale
  

   

  Known by various names, such as contract of purchase, purchase agreement, or sales agreement according to location or jurisdiction. A contract in which a seller agrees to sell and a buyer agrees to buy, under certain specific terms and conditions spelled out in writing and signed by both parties.

   

• Adjustment Period
  

   

  This is the length of time for which the interest rate is fixed on an adjustable rate mortgage. After that period it will be adjusted. Typically once or twice a year depending on the index.

   

• Adjustable Rate Mortgage (ARM)
  

   

  A mortgage where the interest rate is not fixed, but changes during the life of the loan in line with movements in an index rate. You may also see ARMs referred to as AMLs (adjustable mortgage loans) or VRMs (variable-rate mortgages).

   

• Acceleration Clause
  

   

  Condition in a mortgage that may require the balance of the loan to become due immediately, if regular mortgage payments are not made or for breach of other conditions of the mortgage.

   

• Abstract (Of Title)
  

   

  A summary of the public records relating to the title to a particular piece of land. An attorney or title insurance company reviews an abstract of title to determine whether there are any title defects which must be cleared before a buyer can purchase clear, marketable, and insurable title.