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Mortgage Glossary, C-D

Closing or settlement

The stage at which the property is formally sold and ownership is transferred from the seller to the buyer. At this time, the buyer takes on the loan obligation and pays all closing costs.

Closing costs

Additional costs beyond the sale price of the property. They must be paid by the borrower to cover the transfer of ownership at closing. The borrower is typically notified about these costs after submitting a loan application.

Convertible ARM

A type of mortgage loan that allows the borrower to change an ARM (Adjustable Rate Mortgage) to an FRM (Fixed Rate Mortgage) under certain conditions.

Credit history

The information about all of the borrower's debt payments. Lenders refer to it to evaluate a potential borrower's ability to repay a loan.

Credit report

A record that lists all past and present debts and the timeliness of their repayment; it documents a borrower's credit history.

Debt-to-income ratio

Your combined housing and non-housing expenses divided by your gross income. Lenders use this ratio to evaluate your ability to repay the mortgage. The lower it is, the better are your chances are of getting a loan. For example, to get a mortgage loan in the USA, your ratio must be lower than 36%.

Discount Point

A sum of money prepaid by the borrower to lower the interest rate on the loan. One discount point is equal to 1% of the loan amount in cash and usually reduces the interest rate by 0.125%.

Down payment

The portion of the home sale price that is paid in cash at the beginning of the loan term. It is not included in the mortgage loan.

Mortgage Glossary, A-B	Mortgage Glossary, E-K