C

Caps: A set percentage amount by which an adjustable rate mortgage may adjust each adjustment period. For adjustable loans, caps are usually quoted as two numbers as in 2/6. The first number indicates how much a loan may adjust at each adjustment period while the second number indicates how much a loan may adjust over its lifetime.

Loans like the 3/1 and 5/1 adjustable which have an initial fixed period are quoted with 3 numbers as in 3/2/6 which would mean that the first adjustment may be as much as 3%, subsequent adjustments are capped at 2% each, and the lifetime cap is 6%.

Closing: Final arrangements to transfer title of property as well as allocate charges and credits.

Closing Costs: Closing costs are fees paid by the borrower when a property is purchased or refinanced. Costs incurred include a loan origination fee, discount points, appraisal fee, title search, title insurance, survey, taxes, deed recording fee, and credit report charges. All closing costs are separated into "non-recurring," and "pre-paid." Non-recurring charges are any items that are paid only once because a loan was obtained or a property bought, such as a loan origination fee. Pre-paid charges are those that recur over time, like insurance and property taxes. These are summarized in the Good Faith Estimate.

Commitment: A written letter of agreement detailing the terms and conditions by which the lender will lend and the borrower will borrow funds to finance a home.

Conforming Loan: A loan for up to and including $417,000 in the continental United States (Alaska and Hawaii limits are higher).

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

Conventional Mortgage: A mortgage loan that is obtained without any additional guarantees for repayment, such as FHA insurance, VA guarantees, or private insurance. This is usually given at an 80% loan-to-value ratio.

Credit Report: A report to a prospective lender on the credit standing of a prospective borrower. Used to help determine creditworthiness. Information regarding late payments, defaults, or bankruptcies will appear here.

 D

Debt-to-Income Ratio (DTI): The ratio of aggregate monthly debt to aggregate monthly income.

Deed: A legal document which affects the transfer of ownership of real estate from the seller to the buyer.

Deed of Trust (DOT): Synonymous to a mortgage. A deed of trust or mortgage is obtained, depending on the state in which the borrower will reside.

Default: The failure to make payments on a loan.

Delinquency: Late- or non-payments of principal, interest, taxes, or insurance.

Depreciation: In real estate and mortgage terms, the decline in the property value.

Down Payment: Money paid by a buyer from his own funds, as opposed to that portion of the purchase price which is financed.