Balloon Mortgage: a mortgage that typically offers low rates for
an initial period of time (usually 5, 7, or 10) years; after that
time period elapses, the balance is due or is refinanced by the
Bankruptcy: a federal law Whereby a person's assets are turned
over to a trustee and used to pay off outstanding debts; this usually
occurs when someone owes more than they have the ability to repay.
Borrower: a person who has been approved to receive a loan and
is then obligated to repay it and any additional fees according
to the loan terms.
Building code: based on agreed upon safety standards within a
specific area, a building code is a regulation that determines
the design, construction, and materials used in building.
Budget: a detailed record of all income earned and spent during
a specific period of time.
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 adjustable-rate mortgage (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.
Cap: a limit, such
as that placed on an adjustable rate mortgage, on how much a monthly
payment or interest rate may
change, either at each adjustment or during the life of the mortgage.
Payment caps do not limit the amount of interest the lender is earning,
so they may cause negative amortization. For more information,
see our guide explaining how
adjustable-rate-mortgage interest rate caps work.
Cash reserves: a cash amount sometimes required to be held in
reserve in addition to the down payment and closing costs; the
amount is determined by the lender.
Certificate of title: a document provided by a qualified source
(such as a title company) that shows the property legally belongs
to the current owner; before the title is transferred at closing,
it should be clear and free of all liens or other claims.
Closing: also known as settlement, this is the time at which the
property is formally sold and transferred from the seller to the
buyer; it is at this time that the borrower takes on the loan obligation,
pays all closing costs, and receives title from the seller.
customary costs above and beyond the sale price of the property
that must be paid to cover the transfer of ownership at closing;
these costs generally vary by geographic location and are typically
detailed to the borrower after submission of a loan application.
For more information, see our guide that provides an
overview of mortgage
settlement closing costs and fees.
Commission: an amount, usually a percentage of the property sales
price, that is collected by a real estate professional as a fee
for negotiating the transaction..
a form of ownership in which individuals purchase and own a unit
of housing in a multi-unit complex; the owner also shares financial
responsibility for common areas.
Conventional loan: a private sector loan, one that is not guaranteed
or insured by the U.S. government.
Conversion clause: a provision in some adjustable-rate mortgages (ARMs) that allows you to change the ARM to a
fixed-rate loan at some point during the term. Conversion is
usually allowed at the end of the first adjustment period.
At the time of the conversion, the new fixed rate is generally set
at one of the rates then prevailing for fixed-rate mortgages. The
conversion feature may be available at extra cost.
residents purchase stock in a cooperative corporation that owns
a structure; each stockholder is then entitled to live in a specific
unit of the structure and is responsible for paying a portion of
Credit bureau score: a number representing the possibility
a borrower may default; it is based upon credit history and is
used to determine ability to qualify for a mortgage loan.
Credit history: history of an individual's debt payment; lenders
use this information to gauge a potential borrower's ability to
repay a loan.
Credit report: a record that lists all past and present debts
and the timeliness of their repayment; it documents an individual's
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information in summary form. This information may not be comprehensive,
is subject to change, and may not apply to all individual circumstances.
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