| Calendar Year |
A year which uses the actual number of days in each month for
a total of 365 days in a year (366 days in a leap year). |
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| Call Option |
A provision in a loan that gives the lender the right to
accelerate the debt, and require for full payment of the loan immediately, at
the end of a specified period or for specified reason. |
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| Cap |
Limit on the amount an adjustable rate mortgage may increase
or decrease during specific intervals and over the term of the loan. This
safeguard protects the buyer from dramatic changes in monthly payments. |
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| Capital Expenditure |
The cost of an improvement made to extend the useful life of a
property or to add to its value, such as adding a room. The cost of repairing a
property is not a capital expenditure. Capital expenditures are appreciated
over their useful life; repairs are subtracted from income for the current
year. |
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| Capital Gain |
Taxable profit derived from the sale of a capital asset. The
capital gain is the difference between the sale price and the basis of the
property, after making appropriate adjustments for closing costs, fixing up
expenses, capital improvements, allowable depreciation, etc. |
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| Capital Improvement |
Any structure or component erected as a permanent improvement
to real property that adds to its value and useful life. See Capital
Expenditure. |
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| Capital |
(1) Money used to create income, either as an investment in a
business or an income property. (2) The money or property comprising the wealth
owned or used by a person or business enterprise. (3) The accumulated wealth of
a person or business. (4) The net worth of a business represented by the amount
by which its assets exceed liabilities. |
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| Capitalization Rate |
The rate of expected return on investment property. A ratio of
income to value. |
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| Capitalization |
An appraising term used in determining value by considering
net operating income and a percentage of reasonable return on investment. |
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| Cash to Close |
Liquid assets that are readily available to be used to pay the
closing cost involved in a closing of a mortgage transaction. |
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| Cash Flow |
The amount of cash derived over a certain period of time from
an income-producing property. The cash flow should be large enough to pay the
expenses of the income producing property (mortgage payment, insurance,
maintenance, utilities, etc.) |
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| Cash Out |
Receiving money back when refinancing your present mortgage.
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| Cash Flow Basis |
This calculation shows when your monthly payment savings
exceed your estimated closing costs and discount points. It does not consider
the tax impact or differences in principal balance reduction between your
current loan and the refinance suggestions. You can use the Amortization
Schedule Calculator to compare principal reduction. |
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| Cash For Transaction |
Enter the amount your want to use toward closing costs
(discount points and fees) and/or to reduce your loan balance. In situations
where your loan balance is above the conforming amount, reducing the principal
may allow you to get a lower rate. Enter zero if you want a no-point loan
and/or to finance the closing fees. |
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| Cash Reserve |
A requirement of some lenders that buyers have sufficient cash
remaining after closing to make the first two monthly mortgage payments. |
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| Cash Available For Closing |
Borrower funds available to cover down payment and closing
costs. If lending guidelines require the borrower to have cash reserves at the
time the loan closes or that the down payment come from certain sources,
borrower's cash available for closing does not include cash reserves or money
from other sources. |
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| Cash-Out Refinance |
A refinance transaction in which the new loan amount exceeds
the total of the principal balance of the existing first mortgage and any
secondary mortgages or liens, together with closing costs and points for the
new loan. This excess is usually given to the borrower in cash and can often be
used for debt consolidation, home improvement, or any other purpose. The
borrower effectively borrows against the home equity. |
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| Ceiling |
The maximum interest rate that can accrue on a variable rate
loan or adjustable rate mortgage (ARM). See lifetime rate cap. |
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| Certificate Of Reasonable Value (CRV) |
A document issued by the Department of Veterans Affairs (VA)
that establishes the maximum value and loan amount for a VA loan, based on an
approved appraisal. |
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| Certificate Of Title |
A statement provided by an abstract company, title company, or
attorney stating who holds title to real estate based on the public record.
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| Certificate of Eligibility |
The document given to qualified veterans which entitles them
to VA guaranteed loans for homes, business, and mobile homes. Certificates of
eligibility may be obtained by sending DD-214 (Separation Paper) to the local
VA office with VA form 1880 (request for Certificate of Eligibility). |
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| Certificate of Title |
A certificate issued by a title company that the seller has
good marketable and insurable title to the property that he is offering for
sale. A certificate of title offers no protection against any hidden defects in
the title that 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. |
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| Certified Copy |
A true copy, attested to be true by the officer holding the
original. |
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| Cestui que trust |
One having an equitable interest in property, legal title
being vested in trustee. |
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| Chain Of Title |
The history of all of the documents affecting title to a
parcel of real property, starting with the earliest existing document and
ending with the most recent. |
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| Channeling |
The illegal practice of directing people to, or away from,
certain areas or neighborhoods because of minority status; Steering. |
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| Chattel |
Personal property. |
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| Clear Title |
A title that is marketable and is free of liens or disputed
legal questions as to ownership of the property. |
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| Closing Cost Item |
A fee or amount that a home buyer must pay at closing for a
particular service, tax, or product. Closing costs are made up of individual
closing cost items such as origination fees and attorney's fees. Many closing
cost items are included as numbered items on the HUD-1 settlement statement.
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| Closing Costs |
Various expenses (over and above the price of the property)
incurred by buyers and sellers in transferring ownership of a property. Closing
costs normally include items such as broker's commissions, discount points,
origination fees, attorney's fees, taxes, title insurance premiums, escrow
agent fees, and charges for obtaining appraisals, inspections and surveys.
Closing costs will vary according to the area of the country. Lenders or real
estate professionals often provide estimates of closing costs to prospective
home buyers even before the HUD-1 settlement statement is delivered. |
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| Closing Statement |
The statement which lists the financial settlement between
buyer and seller, and also the costs each must pay. A separate statement for
buyer and seller is sometimes prepared. |
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| Closing |
The conclusion or consummation of a transaction. In real
estate, closing includes the delivery of a deed, the signing of notes and
security instruments, and the disbursement of funds necessary to the sale or
loan transaction. Also referred to as settlement. |
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| Cloud On Title |
An outstanding claim or lien, revealed by a title search, that
adversely affects the owner's title to real estate. Usually, clouds on title
cannot be removed except by a quit claim deed, release, or court action. |
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| Co-operative or Co-op |
In a residential co-operative, the buyer purchases shares in
the co-op corporation which is made up of the residents in the co-op property.
The buyer owns the shares rather than owning real property. In exchange he has
the right to lease and occupy a co-op unit. |
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| Co-Maker |
Equally responsible for repayment as the borrower. |
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| Co-Signer |
A person who signs a promissory note along with the borrower.
A co-maker's signature helps to assure that the loan will be repaid. The
borrower and the co-maker are jointly responsible for the repayment of the
loan. |
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| Co-Borrower |
Additional borrower(s) whose income contributes to qualifying
for a loan and whose name(s) appears on documents with equal legal obligations.
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| Coinsurance |
A sharing of insurance risk between the insurer and the
insured. Coinsurance depends on the relationship between the amount of the
policy and a specified percentage of the actual value of the property insured
at the time of the loss. |
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| Coinsurance Clause |
A provision in a hazard insurance policy stating the minimum
amount of coverage that must be maintained as a percentage of the total value
of the property in order for the insured to collect the full amount of a loss.
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| Collateral |
Property pledged as security for a debt, such as the real
estate pledged as security for a mortgage. |
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| Combined Loan To Value (CLTV) |
The ratio of the total amount borrowed on all mortgages
against a property compared to the appraised value of the property. For
example, if you have an $80,000 1st mortgage and a $10,000 2nd mortgage on a
home with an appraised value of $100,000, the CLTV is 90%
($80,000+$10,000=$90,000 / $100,000=90%). |
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| Commingling |
The illegal practice of combining or mixing clients' funds
with the agent's own funds. |
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| Commission |
Money 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: 4 to 7 percent on houses, 10 percent on land.
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| Commitment |
A written promise to make or insure a loan for a specified
amount and on specified items. |
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| Commitment Letter |
A formal notification from a lender stating that the
borrower's loan has been conditionally approved and specifying the terms under
which lender agrees make the loan. Also known as a "loan commitment."
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| Commitment Fee (Loan) |
Any fee pledge made by the lender to the borrower to a lender
for the lenders promise to lend money at a specified rate and within a given
time period. |
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| 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. |
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| Common Area Assessments |
Payments required of individual unit owners in a condominium
or planned unit development (PUD) project for additional capital to defray
homeowners' association costs and expenses and to repair, replace, maintain,
improve, or operate the common areas of the project. |
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| Community Reinvestment Act |
The federal law which requires federally regulated lenders to
describe the geographical market area they serve. Deposits from that area are
to be reinvested in that area whenever practical. |
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| Community Seconds® |
An alternative financing option for low- and moderate-income
households under which an investor purchases a first mortgage that has a
subsidized second mortgage behind it. The second mortgage may be issued by a
state, county, or local housing agency, foundation, or nonprofit organization.
Payment on the second mortgage is often deferred and carries a very low
interest rate (or no interest rate at all). Part or all of the second mortgage
debt may be forgiven depending on how long the buyer remains in the home. |
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| Community Property |
In some Western and Southwestern states, the law specifies
that property acquired during a marriage is presumed to be owned jointly by the
husband and wife unless acquired as separate property of one spouse or the
other. |
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| Comparables |
Used for comparative purposes in the appraisal process.
Comparables are properties like the property under consideration; they have
reasonably the same size, location, and amenities and have recently been sold.
Comparables help the appraiser determine the approximate fair market value of
the subject property. |
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| Compound Interest |
Interest which is computed on the principal and any unpaid
accumulated interest. |
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| Condemnation |
The taking of private property for public use by a government
unit, against the will of the owner, but with payment of just compensation
under the government's power of eminent domain. Condemnation may also be a
determination by a governmental agency that a particular building is unsafe or
unfit for use. |
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| Conditional Sales Contract |
A contract for the sale of property where the buyer has
possession and use, but the seller retains title until the conditions of the
contract have been fulfilled. Also known as a land contract. |
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| Condominium |
A real estate project in which each unit owner has title to a
unit in a multi-unit building, an undivided interest in the common areas of the
project, and sometimes the exclusive use of certain limited common areas. |
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| 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. |
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| Condominium Conversion |
Changing the ownership of an existing building (usually a
rental project) to the condominium form of ownership. |
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| Condominium or Condo |
A condominium is a home in a shared building or development.
The buyer gets title the space inside the unit, shares the common areas with
other unit owners and pays a maintenance fee to the condominium association to
pay for needed maintenance, repairs and improvements to the property. |
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| Conforming |
A mortgage loan that conforms to regulatory limits such as
loan-to-value ratio, term and other characteristics. |
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| Conforming Loan |
Conventional home mortgages eligible for sale and delivery to
either the Federal National Mortgage Association (FNMA) or the federal Home
Loan Mortgage Corporation (FHLMC). These agencies generally purchase
traditional fixed rate level payment first mortgages up to loan amounts
mandated by Congressional directive. |
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| Consideration |
The price or subject matter which induces a contract; may be
in money, commodity, exchange, or a transfer of personal effort. |
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| Construction/end Loan |
A mortgage that finances the construction of a home and
converts to permanent financing when the home is completed. It allows buyers to
deal with only one lender, file only one credit application and pay only one
set of closing costs. |
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| Construction Loan |
A short term interim loan to pay for the construction of
building or homes. These are usually designed to provide periodic disbursements
to the builder as he progresses. |
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| Consumer Protection Act |
Makes it illegal for false, misleading, or deceptive acts or
practices in the advertising, offering for sale, selling, or leasing of any
real or personal property. The Act provides for civil penalties and in some
cases, for mandatory triple damages and attorney fees for the aggrieved party.
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| Consumer Reporting Agency (or bureau) |
An organization that prepares reports that lenders use to
determine a potential borrower's credit history. The agency obtains data for
these reports from a credit repository as well as from creditors such as
mortgage lenders, credit card companies, department stores, etc. |
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| Contingency |
A condition that must be met before a contract is legally
binding. For example, home purchasers often include a contingency that
specifies that the contract is not binding until the purchaser obtains a
satisfactory home inspection report from a qualified home inspector. |
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| Contract for Deed |
A contract for the sale of real estate where the deed (title)
of the property is transferred only after all the payments have been made. Also
known as a land contract, agreement of sale, conditional sales contract, or
installment contract. |
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| Contract Sales Price |
The full purchase price as stated in the contract. |
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| Contract of Sale |
The agreement between the buyer and seller on the purchase
price, terms, and conditions necessary to both parties to convey the title to
the buyer. |
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| Contract |
A legally enforceable agreement to do, or not to do, a
particular thing for a consideration. |
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| Contract Sale or Deed |
A contract between purchaser and a seller of real estate to
convey title after certain conditions have been met. It is a form of
installment sale. |
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| Contract for Exchange of Real Estate |
A contract for the sale of real estate in which the
consideration is paid wholly or partly in real property instead of cash. |
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| Contractor |
Individual or company offering services for payment; builder.
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| Conventional Mortgage |
A mortgage not obtained under a government insured program
(such as FHA or VA). |
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| Conventional Loans |
A loan secured by investors, but neither insured by the FHA
nor guaranteed by VA. Both fixed rate and adjustable rate loans are available
with conventional financing. |
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| Conversion Clause |
A provision in some ARMs that allows you to change the ARM to
a fixed-rate loan at some point during the term. Usually the conversion is
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 rate then
prevailing for fixed-rate mortgages. The conversion feature may be available at
extra cost. |
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| Convertible ARM |
Some ARMs include a provision allowing conversion to a
fixed-rate mortgage at specified times, typically during the first five years
of the loan. Some lenders charge a premium for this option, find out the exact
conversion terms and costs from your lender. This will help you decide whether
this is a cost-effective option. |
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| Convertible Loan |
Some ARM Color loans include a provision that allows it to
convert to a fixed rate mortgage at specific times, usually from the end of the
first through the fifth years. There is usually an additional fee, $300-$500,
to convert it. |
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| Conveyance |
Written instrument, such as a deed or lease, that evidences
transfer of some ownership interest in real property from one person to
another. |
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| Cooperative Apartment / Housing |
Rather than renting an apartment the tenant buys stock in the
corporation that owns the building. The cost of the stock is usually determined
by the size of the apartment. |
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| Cooperative (co-op) |
A type of multiple ownership in which the residents of a
multi-unit housing complex own shares in the cooperative corporation that owns
the property, giving each resident the right to occupy a specific apartment or
unit. |
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| Corporate Relocation |
Arrangements under which an employer moves an employee to
another area as part of the employer's normal course of business or under which
it transfers a substantial part or all of its operations and employees to
another area because it is relocating its headquarters or expanding its office
capacity. |
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| Cost Approach to Value |
An estimate of value based on current construction costs, less
depreciation, plus land value. |
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| Cost Plus Contract |
A building contract setting the builder's profit at a set
percentage of actual cost of labor and materials. |
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| Cost Of Funds Index (COFI) |
An index that is used to determine interest rate changes for
certain adjustable-rate mortgage (ARM) plans. It represents the
weighted-average cost of savings, borrowings, and advances of the 11th District
members of the Federal Home Loan Bank of San Francisco. See adjustable-rate
mortgage (ARM). |
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| Counter-offer |
A rejection of an offer by a seller along with an agreement to
sell the property to the potential buyer on terms differing from the original
offer. |
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| County |
A division within a state, usually encompassing one or more
cities or towns. |
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| Covenants |
Agreements written into deeds and other instruments stating
performance or non-performance of certain acts or noting certain uses or
non-uses of property. |
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| Credit Limit |
The maximum amount that you can borrow under a home equity
plan. |
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| Credit Repository (credit bureau) |
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. |
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| Credit Scoring |
Credit scores are numerical values that rank individuals
according to their credit history at a given point in time. Your score is based
on your past payment history, the amount of credit you have outstanding, the
amount of credit you have available, and other factors. According to Fannie
Mae--one of the major investors in home loans, credit scores have proven to be
very good predictors of whether a borrower will repay his or her loan. |
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| Credit Report |
A detailed account of the credit, employment and residence
history of an individual used by a prospective lender to help determine
creditworthiness. Credit reports also list any judgments, tax liens,
bankruptcies or similar matters of public record entered against the
individual. |
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| Credit Rating |
An expression of creditworthiness based upon present financial
condition and past credit history. |
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| Credit Life Insurance |
A type of insurance that pays off a loan if one of the
borrowers dies while the policy is in force. |
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| Credit |
An agreement in which a borrower receives money or something
of value in exchange for a promise to repay the lender on specified terms at a
later time. |
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| Credit Report / History |
Lenders will investigate your credit record which is a history
of your debts. They get a report from a credit reporting agency (TRW, Equifax,
TransUnion) which shows if you pay you debts on time and with who you have
current debts with. |
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| Credit Limit |
The maximum amount that can be borrowed under the home equity
line of credit. |
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| Credit History |
An evaluation of an individual's capacity and history of debt
repayment. A credit history helps a lender to determine whether a potential
borrower is likely to repay a loan in a timely manner. |
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| Creditor |
A person to whom money is owed. |
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| CRS |
Certified Residential Specialist; A professional title given
to agents who complete an advanced course of study in residential real estate
and are proficient in sales and production; they are members of the Residential
Sales Council. |
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| Cul-de-Sac |
A dead end street which widens sufficiently at the end to
permit an automobile to make a "U" turn. |
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| Cumulative Interest |
Total interest accrued. |
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| Current PITI |
This is an abbreviation for a monthly payment that includes
principal, interest, taxes and insurance. In mortgage lending it is common for
the monthly mortgage payment to include not only the principal and interest
payment on the loan, but an escrow amount for real estate taxes and hazard
insurance as well. |
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| Curtailment |
A payment that reduces the principal balance of a loan. |
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