Capitalized Cost
The total value of an auto that is leased.

Capitalized Cost Reduction
The amount paid in cash or trade-in at the beginning of a lease. Similar to a down payment made on a new auto purchase.

Caps (Interest)
Consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage may change per year and/or the life of the loan.

Caps (Payment)
Consumer safeguards which limit the amount monthly payments on an adjustable rate mortgage may change.

Captive Finance Company
A finance company that is separate from a dealership but is owned by a parent company. Automobile manufacturers have established captive finance companies for the purpose of financing autos for consumers. These finance companies are able to finance any vehicle - not just the specific manufacturer's products. Often, a dealer will give you a choice of a special dealer finance rate or a manufacturer's rebate. In many cases, the rebate will be a better deal.

Cash Flow
A measure that compares your income and your expenses. When more cash comes in than goes out, you have a positive cash flow. Negative cash flow occurs when more cash goes out than comes in. Your ability to qualify or be approved for a loan is determined in part by your cash flow situation.

Cash-out Refinance
Refinancing transaction in which the money the borrower receives from the new loan exceeds the total amount he uses to repay the existing first mortgage, closing costs, points; and satisfy any outstanding subordinate mortgage liens. In other words, a refinance transaction in which the borrower receives additional cash he can use for any purpose.

Cash Value
The accumulated savings component of a life insurance policy, which is available to the holder for a loan. The policy holder will receive payment in this amount if the policy is cancelled or lapses before the policy matures or the insured person dies. Also known as the cash surrender value.

CD indexed
These ARMs are indexed to Certificate of Deposits (CDs). Adjustments occur every six months, with a per adjustment cap of 1 percent and a lifetime cap of 6 percent.

Certificate of Title
A certificate issued by a title company or a written opinion 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.

Close-Ended Lease
The higher the capitalized cost and the lower the residual value, the higher the auto's depreciation and the more you'll pay in lease payments. However, the lessor (the company leasing the auto) accepts the risk that depreciation may be greater than stated in the lease. In this case, auto is worth less than the residual value stated in the lease and the lessor is responsible for that loss.

Closing
The meeting between the buyer, seller and lender where the property and funds legally change hands. Also called settlement.

Closing Costs
Includes a loan origination fee, points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other costs assessed at settlement. The closing costs usually are about 2 percent to 6 percent of the mortgage amount.

Closing Day
The day on which the formalities of a real estate sale are finished. 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 reiterates the original agreement reached in the agreement of sale.

Cloud (On Title)
An outstanding claim which negatively affects the marketability of title.
Collateral Property offered to support a loan that can be seized if you default.

Collision Insurance
Insurance which covers damage to your vehicle that results from a collision with another vehicle or object. Different than comprehensive insurance.

Commission
The fee charged by or paid to a broker, agent or auto sales rep for negotiating a real estate, car sale or loan transaction. A commission is generally a percentage of the sales price.

Commitment
An agreement, often in writing, between a lender and a borrower to loan money at a future date subject to the stated conditions.

Competitive Market Analysis (CMA)
A report prepared by a real estate agent that determines a house's market value. The agent compares the house's attributes to similar properties in the area that have recently sold or are still on the market. The CMA is often used to establish the listing price.

Compounded
Interest Interest is computed on the principal balance of a mortgage plus accrued interest.
Comprehensive Insurance Insurance which covers damage to your vehicle caused by events other than a collision, such as flood, fire, hail, theft, or vandalism. Different than collision insurance.

Condemnation
A determination by a governmental agency that a particular building is unsafe or unfit for use.

Condominium
Individual ownership of a unit and an individual interest in the common areas and facilities which serve the project.

Condominium Association
An association of unit owners in a condominium building. The association elects a board of directors, which handles the maintenance and repair of common areas, disputes among unit owners, and enforcement of rules and regulations, and condominium fees.

Condominium Fees
Also called maintenance fees, the monthly fees paid by all condominium owners. The condominium fees go toward the maintenance and repair of common areas in the building, as well as salaries for groundskeepers, repairmen and security guards. The condominium fees are set and managed by the condominium association, and are typically determined based on the size of your unit.

Conduit
Secondary market entity that purchases loans from originators. Conduits provide expertise to evaluate, price, purchase, and service nonconforming loans.

Conforming Loan
Any loan that meets the criteria and limits set forth by the largest buyers of loans, Fannie Mae or Freddie Mac.

Construction Loan
A short term interim loan for financing the cost of construction. The lender advances funds to the builder as the work progresses.

Consumer Reporting Agency
An organization, commonly referred to as a credit bureau, that prepares credit reports which are used by lenders to determine a potential borrower's credit history. The agency obtains data for these reports from a credit repository and from other sources.

Contractor
A person who contracts to erect buildings. There are also contractors for each phase of construction: heating, electrical, plumbing, air conditioning, road building and others.
Conventional Loan A mortgage not insured by FHA or guarantee by the VA or Farmers Home Administration (FmHA).

Conventional Mortgage
Any mortgage which is not insured or guaranteed by a government agency such as HUD/FHA, VA, or the Farmers Home Administration.

Conversion Option
A conversion option allows you to convert an ARM to a fixed rate mortgage. You will likely pay a higher rate or more points to have this option.

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.

Correspondent
An entity that typically sells the Mortgages it originates to other lenders. The Correspondent performs some or all of the loan processing functions such as taking the loan application, ordering credit reports, appraisals, title reports, and verifying the borrower's income and employment. The Correspondent may or may not have delegated underwriting and typically funds the loans at settlement. The Mortgage is closed in the Correspondent's name and the Correspondent may or may not service the Mortgage. The Correspondent could commission a Mortgage Broker to perform some of the processing functions.

Cosigner
Another person who signs your loan and assumes equal responsibility for it.

Cost of Funds
These ARMs are indexed to the actual costs of what banks pay to borrow money. Rates can adjust every month, six months, or every year.

Covenants, Conditions and Restrictions (CC&Rs)
A set of rules and regulations governing a condominium building. The CC&Rs can include restrictions on things such as noise levels, pet ownership and renovations. These rules are enforced by the condominium association.

Credit
The right granted by a creditor to pay in the future in order to buy or borrow in the present; also, a sum of money owed to a person or business.

Credit Bureau
An agency that keeps your credit record.

Credit Card
Any card used from time to time to borrow money or buy goods or services on credit.

Credit History
The record of how you've borrowed and repaid debts.

Credit Limit
The maximum amount of charges that may be charged to an account. For example, if you have a credit limit of $5,000, your total charges cannot exceed this amount.

Credit Ratio
The ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debts is divided by his or her net income (FHA/VA loans) or gross monthly income (Conventional loans).

Credit Report
Report of an individual's credit history that a credit reporting company (CRC) or credit repository prepares that you use to determine a borrower's creditworthiness.

Credit Reporting Company
Company that collects information received from more than one credit repository, merges all the information, and reports it in one form; merged credit reports.

Credit Repository
Company that collects information on an individual's credit history and reports it in one form, the in-file credit report.

Credit Scoring System
Statistical system used to rate credit applicants according to various characteristics relevant to creditworthiness.

Credit Warranty
Guarantee or promise by the seller of the loan relating to the creditworthiness of the borrower(s). The seller warrants that the borrower has the willingness to repay and there is evidence of an acceptable credit reputation.

Creditor
A person or business from whom you borrow or to whom you owe money.

Credit-related Insurance
Health, life, or accident insurance designed to pay the outstanding balance of debt.

Creditworthiness
Past and future ability to repay debts.

Current Index Value
Your current index value is the index that is used to figure your interest adjustment on ARMs.

Customer Incentive (Rebate)
Commonly referred to as rebate, an incentive is paid by manufacturer to the customer as a way to increase product sales that are usually targeted for a quick sale. For example, slow-selling vehicles or previous model-year autos still in the dealerships may be priced with an incentive to sell faster than they have been. The payment can be applied to the cost of the vehicle or received in cash by the customer. Or, the auto buyer may choose special dealer financing. Often, taking the rebate is the better deal.

Top of Page