Glossary 

Broker: An individual or firm that acts

Certificate of Deposit: A document is-

as an agent between providers and users

sued by a bank or other financial institu-

of products or services, such as a mort-

tion that is evidence of a deposit, with the

gage broker or real estate broker. See

issuer's promise to return the deposit plus

also "Mortgage Broker."

earnings at a specified interest rate within

a specified time period.

Building Code: Local regulations that

Certificate of Eligibility: A document is-

set forth the standards and require-

ments for the construction, maintenance

sued by the U.S. Department of Veterans

and occupancy of buildings. The codes

Affairs (VA) certifying a veteran's eligibility

are designed to provide for the safety,

for a VA-guaranteed mortgage loan.

health and welfare of the public.

Chain of Title: The history of all of the

Buydown: An arrangement whereby

documents that have transferred title to

the property developer or another third

a parcel of real property, starting with the

party provides an interest subsidy to

earliest existing document and ending

reduce the borrower's monthly payments

with the most recent.

typically in the early years of the loan.

Change Orders: A change in the original

Buydown Account: An account in

construction plans ordered by the prop-

which funds are held so that they can be

erty owner or general contractor.

applied as part of the monthly mortgage

Clear Title: Ownership that is free of

payment as each payment comes due

during the period that an interest rate

liens, defects, or other legal encumbranc-

buydown plan is in effect.

es.

Closing: The process of completing a

C

financial transaction. For mortgage

loans, the process of signing mortgage

documents, disbursing funds, and, if

Cap: For an adjustable-rate mortgage

applicable, transferring ownership of

(ARM), a limitation on the amount the

the property. In some jurisdictions, clos-

interest rate or mortgage payments may

ing is referred to as "escrow," a process

increase or decrease. See also "Lifetime

by which a buyer and seller deliver legal

Payment Cap," "Lifetime Rate Cap," "Pe-

documents to a third party who completes

riodic Payment Cap," and "Periodic Rate

the transaction in accordance with their

Cap."

instructions. See also "Settlement."

Capacity: Your ability to make your

Closing Agent: The person or entity that

mortgage payments on time. This de-

coordinates the various closing activities,

pends on your income and income

including the preparation and recordation

stability (job history and security), your

of closing documents and the disburse-

assets and savings, and the amount of

ment of funds. (May be referred to as an

your income each month that is left over

escrow agent or settlement agent in some

after you've paid for your housing costs,

jurisdictions.) Typically, the closing is con-

debts and other obligations.

ducted by title companies, escrow compa-

nies or attorneys.

Cash-out Refinance: A refinance trans-

action in which the borrower receives

Closing Costs: The upfront fees charged

additional funds over and above the

in connection with a mortgage loan trans-

amount needed to repay the existing

action. Money paid by a buyer (and/or

mortgage, closing costs, points, and any

seller or other third party, if applicable)

subordinate liens.