Cap
A maximum amount of charges. Example: An ARM with a 5% rate cap could not adjust the interest rate by more than 5%.

Capital
Money used to create income, either as investment in a business or income property.

Capital Gains and Losses

• For tax purposes, the difference between the purchase price and selling price.
• Profit or loss that occurs when an investor sells an asset. If the asset's sale price is greater than the original purchase price, a capital gain results. If the asset is sold for less than the original price the investor experiences a capital loss.

Cash and Short-Term Securities
Securities that mature in less than one year.

Cash Out
To take the entire, or portion, amount of a seller's equity in cash rather than to retain some interest in the property, such as a purchase money mortgage or deed of trust.

Certificate of Deposit
An arrangement between an investor and a financial institution which calls for the financial institution to pay a specific rate of interest over a set period of time. Certain deposits are FDIC insured up to applicable limits.

Certificate of veteran status
The document given to veterans or reservists who have served 90 days of continuous active duty (including training time). It may be obtained by sending DD 214 to the local VA office with form 26-8261a (request for certificate of veteran status. This document enables veterans to obtain lower down payments on certain FHA insured loans).

Claim Against an Estate
Refers to a charge against an estate to settle an agreement or an outstanding obligation (as in the case of bills unpaid at the time of death).

Closing
In real estate sales, the final procedure in which documents are executed and/or recorded, and the sale (or loan) is completed.

Closing Agent/Attorney
A closing agent or attorney assures that all documentation related to the sale of a house has been completed properly, including the title search and title insurance. The closing agent explains all closing documents to the buyer and the seller, obtains their signatures where necessary and records the documents.

Closing Costs
Expenses incidental to a sale of real estate, such as loan fees, title fees, appraisal fees, etc.

Closing Statements
A financial disclosure giving an account of all funds received and expected at the closing, including the escrow deposits for taxes, hazard insurance, and mortgage insurance.

Codicil
An addition or other change to an existing will.

Collateral
Property pledged as security for a debt, such as real estate as security for a mortgage.

Commission
An agent's fee for negotiating a real estate or loan transaction, often expressed as percentage of the sales price or mortgage amount.

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

Commitment Letter
A written promise to make or insure a loan for a specified amount and on specified terms.

Commodities
Investments in 'hard' assets, such as gold, silver or oil.

Common Stock
Units of ownership that give voting rights to shareholders. (See Preferred Stock.)

Condominium
A form of ownership of real property. The purchaser receives title to a particular unit and a proportionate interest in certain common areas.

Construction Loan
Short term financing of real estate construction. Generally followed by long term financing called a "take out" loan, issued upon completion of improvements.

Construction Loan Draw
A partial disbursement of the construction loan based on the schedule of payments in the loan agreement. Also called takedown.

Contest of a Will
Legal proceedings to prevent or alter distribution of estate assets as described in a will.

Contingency
A condition that must be met before a contract is binding. For example, the sale of a house might be contingent upon the seller paying for certain repairs.

Contract of Sale
A contract between a purchaser and a seller of real property to convey a title after certain conditions have been met and payments have been made.

Conventional Loan
A mortgage not insured by FHA or guaranteed by the VA.

Cooperative Apartment
Also called a stock cooperative or a co-op. A structure of two or more units in which the right to occupy a unit is obtained by the purchase of stock in the corporation which owns the building. Difficult to obtain financing because there is not individual ownership of each unit. A forerunner of the condominium.

Credit Rating
A rating given a person or company to establish credit worthiness based upon present financial condition, experience and past credit history.

Credit Report
A report to a prospective lender on the credit standing of a prospective borrower, used to help determine credit worthiness. Several national and local companies make such reports.

Cyclical Stocks
Stocks whose earnings fluctuate according to the business cycle.