Castle Commercial Mortgage: Lending Glossary


1031: Internal Revenue Code Section 1031 that authorized tax deferral on like kind exchanges.

Acquisition Costs/Purchase Price: Under an FHA loan, the purchase price or appraised value of the property plus the estimated closing costs. CCMCo. Fix & Flip loans can go up to 80% of the ARV which includes the Acquisition Cost/Purchase Price.

Appraisal: The report made by a qualified appraiser setting forth an opinion or estimate of value. The term also refers to the process by which this estimate is obtained.

APR: Acronym for - Annual Percentage Rate.

ARM : Acronym for - Adjustable Rate Mortgage.

ARV: Acronym for - After Repair Value; which usually is determined by a trained, licensed independent appraiser after looking at the property, fix up plans and reviewing local comps (of similar properties) then calculates a value and justified by a couple of different methods (also see Sales Comparison Approach; Cost Approach to Value & Income Approach to Value).

Accrued Interest : Interest that has accumulated over the time elapsed since the borrower's last payment.

Balloon Payment : The unpaid, principal amount of a mortgage loan that is due on a specified date, and paid in a lump sum at the end of the term.

Bankruptcy: Legal relief from the payment of all debts after the surrender of all assets to a court-appointed trustee. Assets are distributed to creditors as full satisfaction of debts, with certain priorities and exemptions. A person, firm or corporation may declare bankruptcy under one of several chapters of the U.S. Bankruptcy Code: Chapter 7 covers liquidation of the debtor's assets; Chapter 11 covers reorganization of bankrupt businesses; Chapter 13 covers payments of debts by individuals through a bankruptcy plan.

Basis Points: 1/100 of 1% (0.01%).

Borrower: This is the person and/or entity that is borrowing funds from a lender and signing a lenders Promissory Note and Deed of Trust for a specific property in exchange for the lenders funds.

CAMB: Acronym for - Colorado Association of Mortgage Brokers.

CAREI: Acronym for - Colorado Association of Real Estate Investors.

Closing: A meeting between borrower and lender in which transfer of ownership is accomplished, funds and deed are exchanged, and all loan documents, including the promissory note and mortgage, are signed.

CMLA: Acronym for - Colorado Mortgage Lenders Association. Castle Commercial Mortgage Co. is a CMLA member.

Co-Borrower: A party who signs the mortgage note along with the borrower and who shares the title to/and the obligation to pay for, the property with the borrower. A Co-Borrower is also called a "co-mortgagor."

Commitment Letter: An agreement, often made in writing, between a lender and a borrower to loan money at a future date subject to compliance with stated conditions.

Construction Loan Agreement: A written agreement between a lender and/or a borrower and a builder in which the specific terms and conditions of construction and/or the construction loan, including the schedule of payments, are spelled out.

Construction Loan Draw: Also called a Draw; The periodic/partial disbursement of the construction loan, based on the schedule of payments in the loan agreement.

Conventional Loan: A mortgage loan not insured by the Federal Housing Administration (FHA) or guaranteed by the Veterans Administration (VA) or Farmers Home Administration (FmHA). No governmental agency approval is required of the lender, borrower or property. It is called "conventional" because it conforms to accepted standards, modified within legal bounds by mutual consent of the borrower and the lender. Also called "conventional residential mortgage."

DOT: Acronym for Deed of Trust.

Deed: The formal written document that transfers the rights of ownership and possession (that is, the title) from the seller to the buyer.

Deed Of Trust: A legal document, which conveys title to real estate to a disinterested third party (trustee) who holds the title until the owner of the property has repaid the debt. In states where it is used, a deed of trust accomplishes essentially the same purpose as a regular mortgage. Also called "trust deed" or "trust indenture." In some states, this is used in place of a mortgage. Three people are involved in a deed of trust: the borrower, the lender and the trustee. The borrower transfers the legal title for the property to the trustee who holds the property as a security for the debt. If the borrower pays the mortgage as agreed, the trustee gives the legal title to the owner. If the borrower does not pay the mortgage as agreed, the trustee can sell the property. This loan document is signed and recorded with the County Public Trustee in Colorado at the closing.

Default: 1) A breach or nonperformance of the terms of a note or the covenants of a mortgage or deed of trust. 2) The failure to do what law or the terms of a contract requires.

Disinterested source:

Equity: The owner's interest, or the amount of cash the owner has, realized, paid in or invested in real estate.

Equity Partner:

Escrow Account: An account held by the lending institution to which the borrower pays monthly installments for property taxes, insurance and other bills, and from which the lender disburses these sums as they become due.

Fixed Interest Rate: A mortgage feature that structures the loan so that there will be no increases or decreases in the interest rate during the life of the loan.

Fixed-Rate Mortgage: The type of loan in which the interest rate will not change for the entire term of the loan.

Foreclosure: An action to eliminate the interest of a borrower in real estate so as to give the lender good title.


Hazard Insurance: A broad form of casualty insurance coverage for real estate that includes protection against loss from fire, certain natural causes, vandalism and malicious mischief.

Inspection:The Home Inspection is done by a licensed Inspector that will check the entire house and write a report to the lender.

Interest: 1) A charge for borrowing money. It is usually expressed on an annual rate, or as a percentage, of the money still owed. For example, the interest rate might be 10%. If a person borrowed $10,000 and agrees to pay it in full at the end of one year, the interest will be $1,000. 2) A right, share or title in property. 3) A general term meaning partial or total right to a property. An interest in real estate might be a right, such as an easement, a lease or partial or full ownership.

Interest-Only Mortgage: A mortgage in which the borrower makes monthly payments of interest only for a specified period of time. This type of loan has a Balloon Payment (i.e. entire principal amount) due on the expiration date of the Promissory Note.

LTV: Acronym for - Loan To Value; which is expressed as a percentage = Amount of Loan divided by the Value of the Property.

Late Fee: An additional charge a borrower is required to pay as a penalty for failure to pay a regular mortgage loan installment when due; a penalty for a delinquent payment.

Lender: This is the person and/or entity that is lending the funds to the borrower to use as specified in the loan documents.


Lien: A legal encumbrance or claim of one person on the property of another as security for a debt or charge.

Loan Origination Fee: A fee the lender charges the borrower to cover the cost of issuing a loan commitment. It pays for processing the loan, which includes collecting information about the borrower's creditworthiness and the property. The fee is usually computed as a percentage (for example, 1%) of the mortgage loan. It usually does not include fees for appraisals, credit reports, inspections and loan document preparation.

Market Value: The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus.

Mortgage Broker: An individual or firm that acts as an agent for both the borrower and the lender of a mortgage loan. The broker places the borrower and lender in contact with each other, and receives a commission from the borrower if a loan results. Unlike a mortgage banker, a mortgage broker does not negotiate the terms of the loan, issue a loan commitment, prepare the loan documents or service the loan.

Mortgage Broker Fee: A charge included in the closing costs, paid to the mortgage broker for originating the loan. This charge is in addition to the lenders origination fee; also measured by points.


Non-Owner Occupied :

Origination Fee : This fee partially offsets the administration costs of the loan. CCMCo. charges and deducted from the proceeds of a loan before disbursement.

Owner Occupied:

PUD : Acronym for - Planned Unit Development. A project that may consist of any combination of one- to four-family homes, condominiums and other styles of residential housing. The individual owner owns the individual unit and often the real estate under it. The common facilities are owned and maintained by a homeowners' association.

Payoff Statement :

Per Diem : (latin term literally translates to "per day") the interest charge expressed on a per day basis. Calculated by the loan amount times the APR divided by 365 days equals the per diem charge for accrued interest.

Points: An amount equal to one percent of the principal amount of a note. Loan discount points are a one-time charge assessed at closing by the lender to increase the yield on the mortgage loan to a competitive position with other types of investments.

Pre-paid Interest: Interest that the borrower pays the lender before it becomes due.

Promissory Note:This loan documents is signed and recorded with the County Public Trustee in Colorado at the closing.

Pre-Approval: Indicates you have been approved for a set loan amount prior to property selection.

Pre-Qualification: Gives you an estimate of how much you may be able to borrow.


Real Estate Agent:

Real Estate Investor:

Real Property: Land and anything permanently affixed to the land, such as fences, buildings and those things attached to the buildings, such as light fixtures or plumbing. May refer to rights in real property as well as the property itself.

Refinance: 1) To change a loan from one financial institution to another, or to rewrite the terms of a loan contract within the existing lending institution. 2) The payment of a debt from the proceeds of a new loan, using the same property as security.

Residential property:


Sales Comparison Approach : This is the appraiser's opinion as the Market Value of a property using sales comparisons in the appraisal.

Title Commitment :

USPAP: Acronym for - Uniform Standards of Professional Appraisal Practice.

Underwriting: The process of verifying data and approving a loan.

Waiver of Lien:

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