Cap
To safeguard against excessively high payment increases, adjustable rate mortgage programs place a cap on the amount by which either the interest rate or payment may rise at any single adjustment, over the life of the loan, or both. Look at the cap as "the worst case scenario" to determine if the ARM suits your financial capabilities.

Closed-End Loan
A credit arrangement in which the borrower and lender agree on the total amount loaned and the number, amount and due dates of each payment; all proceeds are advanced at time of closing.

Closing or Settlement
The meeting between the seller and buyer when the property legally changes hands.

Closing Costs or Settlement Fees
Fees paid to effect the closing of a mortgage (e.g., origination fee, discount points, title insurance fees, survey fees, and attorney's fees).

Collateral
The security offered by the borrower to secure his promise to pay a debt; the security may become the property of the lender, if the borrower fails to repay the funds.

Collection
The servicing procedure followed to bring a delinquent mortgage loan current and to file the required notices to begin foreclosure if necessary.

Combined Loan-to-Value ("CLTV")
The relationship of the outstanding balances of a first and second mortgage to the appraised value of the security used to determine the maximum lendable amount on real estate.

Commitment
A lender's offer to grant a mortgage loan outlining the terms, the amount of the loan, the interest rate and other conditions. It can also serve as a communication of the lender's decision on the borrower's application.

Conforming Loan
A loan, which meets all requirements to be eligible for purchase or security by federal agencies other than FHA and VA.

Conventional Mortgage
A mortgage loan which is not insured or guaranteed by a government agency such as FHA or VA.

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

Credit Pre-Approval
A process in which an individual can apply for a credit pre-approval decision before he/she actually finds a home and enters into a sales agreement.

Credit Report
A report on the credit standing of a prospective borrower, used to aid in the determination of credit worthiness.

Credit Score
A score based upon present financial condition, experience and past credit history used to determine the credit standing and credit worthiness of a prospective borrower.

Current Debt
The amount of money owed on a property, or other secured or unsecured loan balance, such as credit cards or car loans.

Debt-to-Income Ratio
A measure of creditworthiness computed by dividing the dollar amount of monthly debts by total gross monthly income, then converting the result to a percentage.

Deed
The legal document that is used to transfer the title from one owner to another.

Delinquent
The state of being one or more months behind the loan payment schedule.

Discount Points
Amount paid to the lender by the borrower or seller to decrease the buyer's interest rate. One point is equal to one percent of the loan amount.

Down Payment
A portion of the sales price paid by a buyer to a seller to close a sales transaction, with the understanding that the balance will be paid later.