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A fee related to the title insurance required by the lender. A public record search exam is done to insure that both you and the lender are aware of any liens or encumbrances that could affect the property. For our comparison purposes, an abstract exam fee is considered to be a third party fee and may be included in the title insurance fee by some lenders.
A provision in a mortgage that gives the lender the right to demand payment of the entire principal balance if a monthly payment is missed.
A party’s consent to enter into a contract and be bound by the terms of the offer.
A sales contract signed by both seller and buyer that defines the terms of the sale.
Additional Principal Payment
A payment by a borrower of more than the scheduled principal amount due, in order to reduce the remaining balance of the loan.
Adjustable Rate Mortgage
An adjustable rate mortgage, commonly referred to as an ARM, is a loan type that allows the lender to adjust the interest rate during the term of the loan. Generally, these changes are determined by a margin and an index so that the interest rate changes, up or down, are based on market conditions at the time of the change. Most often these interest rate changes are limited by a rate change cap and a lifetime cap. If you apply for an adjustable rate mortgage, the lender is required to provide you with an ARM Program Disclosure which spells out the terms of the loan.
An analysis performed by a qualified individual to determine the estimated value of a home.
In order to verify that the value of your home supports the loan amount you request, an appraisal will be ordered by the lender. The appraisal is generally performed by a professional who is familiar with home values in the area and may or may not require an interior inspection of the home. The fee for the appraisal is commonly passed on to the borrower by the lender. For our comparison purposes, the appraisal fee is a third party fee.
An opinion of a property’s fair market value, based on an appraiser’s knowledge, experience and analysis of the property.
A person qualified by education, training, and experience to estimate the value of real property and personal property.
A short-term fixed-rate loan which involves smaller payments for a certain period of time and one large payment for the entire balance due at the end of the loan term.
The final payment that is made at the maturity date of a balloon mortgage and pays the loan in full.
An agreement between a buyer and seller to purchase real estate. A binder, also known as an offer to purchase or a sales contract, secures the right to purchase real estate upon agreed terms for a limited period of time. If the buyer changes his mind or is unable to purchase, the earnest money that was paid is forfeited unless the binder expressly provides that it is to be refunded.
A sum of cash paid to a seller by a buyer prior to the closing to show that the buyer is serious about buying the house. The binder deposit is deducted from the purchase price at closing and is not an additional cost. Sometimes referred to as earnest money.
A contract provision that gives the right to terminate obligations upon the occurrence of specified events.
Refers to a provision of an adjustable rate mortgage (ARM) that limits how much the interest rate or payment can increase or decrease.
Refers to a provision of an adjustable rate mortgage (ARM) that limits how much the interest rate or payment can increase or decrease.
The cost of an improvement made to extend the useful life of a property or to add to its value.
Any component constructed as a permanent improvement to real property that increases its value and adds to its useful life.
Cash Out Refinance
A cash-out refinance is a refinancing of an existing mortgage loan, where the new mortgage loan is for a larger amount than the existing mortgage loan, and you (the borrower) receive the difference between the two loans in cash. Basically, homeowners do cash-out refinances to convert the equity in their home into cash.
Certificate of Eligibility
A document issued by the federal government certifying a veteran’s eligibility for a Department of Veterans Affairs (VA) loan.
Certificate of Reasonable Value (CRV)
A document issued by the Department of Veterans Affairs (VA) that establishes the maximum value and loan amount for a VA loan.
Close of Escrow
A meeting of the parties involved in a real estate transaction to finalize the process. In the case of a purchase, the close of escrow usually involves the seller, the buyer, the real estate broker and the lender. In the case of a refinance, the close of escrow involves the borrower and the lender. Sometimes referred to as the settlement or closing.
A meeting of the parties involved in a real estate transaction to finalize the process. In the case of a purchase, a closing usually involves the seller, the buyer, the real estate broker and the lender. In the case of a refinance, the closing involves the borrower and the lender. Sometimes referred to as the settlement or the close of escrow.
Closing Cost Item
A single fee that a home buyer must pay at closing. Closing costs are made up of individual closing cost items such as origination fees, escrow fees, underwriting fees and processing fees. Most closing cost items are included as numbered items on the HUD-1 Settlement Statement.
The total of all the items that must be paid at closing related to your new mortgage.
A five-page form, created by the Consumer Financial Protection Bureau (CFPB), that provides final details to a borrower about the mortgage loan selected. The form is completed by the lender and lists the loan terms, projected monthly payments, and closing costs. To avoid surprises, lenders are required to provide the borrower with a copy of the Closing Disclosure three days before closing. This three day window allows the borrower time to compared the final terms and costs in the Closing Disclosure with those included in the Loan Estimate
Also referred to as the HUD-1 or the settlement statement, this is the document that provides line by line detail of the financial details related to a specific real estate transaction such as the fees paid by the seller and the buyer for a purchase transaction or the fees paid by the borrower for refinances.
The fee charged by a broker or agent for negotiating a real estate or loan transaction. A commission is generally a small percentage of the price of the property or amount borrowed. Sometimes called points.
A written offer from a lender to provide financing to a borrower. The commitment letter states the terms under which the lender agrees to provide financing to the borrower. Also called a loan commitment.
A provision in some adjustable-rate-mortgages (ARM’s) that allows the borrower to change the ARM to a fixed-rate-mortgage at a specified period within the term of the loan.
An adjustable rate mortgage (ARM) that allows a borrower to convert their mortgage to a fixed rate loan for the remainder of the loan term if certain conditions are met.
The written instrument that conveys a property from the seller to the buyer. The deed is recorded at the local courthouse so that the transfer of ownership is part of the public record.
Deed of Trust
This document, referred to as a mortgage in some states, pledges a property to a lender or trustee as security for the repayment of a debt.
A tax that is required in some municipalities if a property changes hands. The amount of this tax can vary with each state, city and county. For our comparison purposes, this fee is considered a tax or other unavoidable fee.
A process that allows a borrower to transfer the ownership of a property to the lender in order to avoid loss of the property through foreclosure.
The portion of the purchase price of a property that the borrower will be paying in cash rather than included in the mortgage amount.
A sum of cash paid to a seller by a buyer prior to the closing to show that the buyer is serious about buying the house. The earnest money is deducted from the purchase price at closing and is not an additional cost. Sometimes referred to as a binder deposit.
A right of way giving persons, other than the owner, access to or over a property.
Easement by Prescription
The continued use of another person’s property for a special purpose that can develop into permanent use if certain conditions are met.
Funds paid by one party to another to hold until a specific date when the funds are released to a designated individual. Generally, an escrow account refers to the funds a mortgagor pays to the lender along with their principal and interest payments for the payment of real estate taxes and hazard insurance. This is also referred to as impounds. The money is held by the lender to make payments when they are due. An escrow can also refer to funds that are held by a third party to ensure the completion of repairs or improvements that must be completed on the property but that cannot be done prior to closing.
The account that funds are held in by the lender for the payment of real estate taxes and/or homeowner's insurance. Can also refer to the account that funds are held in for the completion of repairs or improvements to a property that cannot be completed prior to closing.
A periodic review of escrow accounts to determine if current monthly deposits balances will provide sufficient funds to pay property taxes, hazard insurance and other bills when they come due.
The portion of a borrower’s monthly mortgage payment that is held by the loan servicing company to pay for property taxes, hazard insurance, mortgage insurance and other items as they become due.
Fair Credit Reporting Act
A federal consumer protection regulation that controls the disclosure of credit information and establishes procedures for correcting mistakes in your credit file.
Federal Housing Administration (FHA)
An area of the U.S. Department of Housing and Urban Development (HUD) that insures low down payment mortgages granted by some lenders. The loan must meet the established guidelines of FHA in order to qualify for the insurance.
Federal Open Market Committee (FOMC)
Policy committee in the Federal Reserve System that sets short-term monetary policy objectives for the Fed. The committee is made up of the seven governors of the Federal Reserve Board, plus five of the 12 presidents of the Federal Reserve Banks.
FHA Co-insured Mortgage
A mortgage for which the Federal Housing Administration (FHA) and the originating lender share the risk of loss in the event of the borrower’s default.
A mortgage insured by the Federal Housing Administration (FHA). FHA loans are also known as government mortgages.
Fixed Rate Mortgage
A mortgage in which the monthly principal and interest payments remain the same throughout the life of the loan. The most common mortgage terms are 30 and 15 years. With a 30-year fixed rate mortgage your monthly payments are lower than they would be on a 15 year fixed rate, but the 15 year loan allows you to repay your loan twice as fast and save more than half the total interest costs.
An inspection to determine if a property is located in an area prone to flooding also known as a flood plain. The federal government determines whether an area is in a flood plain. Lenders generally rely on the flood certification to determine if flood insurance will be required in order to obtain a mortgage. For our comparison purposes, the cost of the flood certification is considered to be a third party fee, though you may find that all lenders do not pass this fee on to the borrower.
Insurance that protects a homeowner from the cost of damages to a property due to flooding or high water. It is required by law that properties located in areas prone to flooding have flood insurance. The federal government determines whether an area is prone to flooding and considered to be in a flood plain.
The legal process in which a borrower's ownership of a property is dissolved due to default. Typically, the property is sold at a public auction and the proceeds are used to pay the loan in full.
The loss of money, or anything else of value, due to a breach of legal obligation or contract.
Fully Amortized ARM
An adjustable-rate mortgage (ARM) with monthly payments that are sufficient to liquidate the remaining principal balance over the amortization term.
Government National Mortgage Association (GNMA)
The annual rate of interest for a loan. Also called the interest rate.
A government-owned corporation within the U.S. Department of Housing and Urban Development (HUD). Created in 1968, GNMA assumed responsibility for the special assistance loan program formerly administered by FNMA. Commonly called Ginnie Mae.
Home Equity Line of Credit (HELOC)
A loan secured by real property, usually in a subordinate position, that allows the borrower to receive the loan proceeds in the form of multiple advances up to a limit that represents a maximum percentage of the borrower's equity in a property.
Home Equity Loan
A loan secured by a subordinate mortgage on one's principal residence, generally to be used for some non-housing expenditure. A traditional home equity loan provides lump-sum proceeds at the time the loan is closed.
A complete and detailed inspection that examines and evaluates the mechanical and structural condition of a property. A complete and satisfactory home inspection is often required by the homebuyer. Compare with appraisal.
HUD, also known as the U.S. Department of Housing and Urban Development, insures home mortgage loans made by lenders meet minimum standards for such homes.
HUD Median Income
Median family income for a particular county or metropolitan statistical area, as estimated by the Department of Housing and Urban Development (HUD).
Also referred to as the closing statement or the settlement statement, this is the document that provides line by line detail of the financial details related to a specific real estate transaction such as the fees paid by the seller and the buyer for a purchase transaction or the fees paid by the borrower for refinances.
The cost of borrowing a lender's money. Interest takes into account the risk and cost to the lender for a loan. The interest rate on a fixed rate mortgage depends on the going market rate and how many discount points you pay up-front. An adjustable rate mortgage's interest is a variable rate made up of the index and the lender's margin.
Interest Rate Buy-down Plan
An arrangement where the property seller, borrower or other party deposits money to an account so that it can be released each month to reduce the borrower's interest rate or monthly payments during a specified period of a loan.
A loan that exceeds the maximum loan amount allowed by the most common mortgage investors. The cost of obtaining a jumbo mortgage is generally higher than the cost of obtaining a conforming mortgage. Also known as a non-conforming loan.
Limited Cash Out Refinance
A refinance transaction in which the mortgage amount generally is limited to the sum of the unpaid principal balance of the existing first mortgage, closing costs (including prepaid items), points, and the amount required to satisfy any mortgage liens if the documented proceeds of the subordinate financing were solely used to acquire the property (if the borrower chooses to satisfy them), and other funds for the borrower's use (as long as the amount does not exceed the lesser of $2,000 or 2% of the principal amount of the new mortgage).
A three-page form, created by the Consumer Financial Protection Bureau (CFPB), that provides a borrower with important details about their loan, including the estimated interest rate, monthly payment, total closing costs, estimated costs of taxes and insurance, and how the interest rates and payments may change in the future. If the loan has special features, such as early payment penalties or increases in mortgage loan balances, the form will also include these details. The lender is required to provide a borrower with this form within three business days after receipt of the loan application. All lenders are required to use the same Loan Estimate form, making it easier for borrowers to compare mortgage loans. The Loan Estimate is not an approval or denial of a loan application, but shows a borrower the terms the lender expects to offer if the borrower decides to move forward with the loan.
Loan Level Pricing Adjustment (LLPA)
A charge assessed for certain risk factors; most commonly low credit scores, high loan-to-value (LTV), and property type. Other risk factors may also affect LLPAs.
The process by which a mortgage lender creates a mortgage secured by real property.
The number of months that you will make monthly payments. If the loan term is the same as the payment calculation term, you will pay the loan in full during the loan term and no balance will be due. If the payment calculation term is greater than the loan term, a balance or "balloon payment" may be due at the end of the loan term.
Loan to Value Ratio (LTV)
A ratio used by lenders to calculate the loan amount requested as a percentage of the value of a home. To determine the loan to value ratio, divide the loan amount by the home's value. The LTV ratio is used to determine what loan types the borrower qualifies for as well as the cost and fees associated with obtaining the loan.
Written agreement in which a lender guarantees a specific interest rate if a loan closes within a set period of time. The lock-in may also specify the number of discount points to be paid at closing.
Insurance provided by a private company to protect the mortgage lender against losses that might be incurred if a loan defaults. The borrower usually pays the cost of the insurance and is most often required if the loan amount is more than 80% of the home's value. Sometimes referred to as private mortgage insurance.
Mortgage Insurance Premium (MIP)
Amount paid by a borrower for mortgage insurance, either to a government agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance (PMI) company
Mortgage Life Insurance
A type of term life insurance often bought by mortgagors. In the event that the borrower dies while the policy is in force, the debt is automatically repaid by insurance proceeds. Not to be confused with mortgage insurance.
Mortgage Registration Fee
A fee or tax charged by some state and local governments when a mortgage is obtained. For our comparison purposes, the mortgage registration fee is considered to be a tax and other unavoidable fee.
A tax charged by some state or local governments that is paid to the state when a mortgage is obtained. For our comparison purposes, the mortgage tax is considered to be a tax and other unavoidable fee.
The person or company who provides the loan funds to the borrower.
The person who receives funds from a lender in exchange for a security interest in the property. Commonly known as the borrower.
A residential mortgage on a dwelling that is designed to house more than four families, such as an apartment complex.
Offer to Purchase
An agreement between a buyer and seller to purchase real estate. An offer to purchase, also known as a binder or a sales contract, secures the right to purchase real estate upon agreed terms for a limited period of time. If the buyer changes his mind or is unable to purchase, the earnest money that was paid is forfeited unless the binder expressly provides that it is to be refunded.
The monthly principal and interest payment required when repaying a mortgage in accordance with its terms.
Fees that are collected by the lender in exchange for a lower interest rate. Commonly called discount points, each point is equal to 1% of the loan amount. For our comparison purposes, a discount point is considered to be a lender fee. To determine if it is wise to pay discount points to obtain a lower rate, you must compare the up-front cost of the points to the monthly savings that result from obtaining the lower rate.
Procedure to determine how much money a potential homebuyer will be eligible to borrow prior to actually applying for a loan.
The actual balance, excluding interest, of a mortgage loan. Also refers to the amount of the monthly mortgage payment that will be applied to the actual balance.
Principal & Interest
The payment required to repay a mortgage in accordance with its terms. Sometimes referred to as "P&I".
The outstanding balance of principal on a loan. Principal does not include interest or fees.
Principal, Interest, Taxes, and Insurance (PITI)
(P)rincipal, (I)nterest, (T)axes, and (I)nsurance is a reference to the total monthly payment required to repay a mortgage in accordance with its term as well as monthly escrow payments for taxes and insurance.
Private Mortgage Insurance
Insurance provided by a private company to protect the mortgage lender against losses that might be incurred if a loan defaults. The cost of the insurance is usually paid by the borrower and is most often required if the loan amount is more than 80% of the home's value. Sometimes referred to as mortgage insurance.
A written promise to pay a specified sum to specified person over a specified period of time.
Taxes based on the assessed value of the home, paid by the homeowner for community services such as schools, public works, and other costs of local government. Sometimes paid as a part of the monthly mortgage payment.
A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.
The annual rate of interest for a loan. Also called the interest rate.
Rate Change Cap
The maximum amount that an interest rate can change, either at an adjustment period or over the entire life of the loan. Commonly associated with an adjustable rate mortgage (ARM).
An agreement by a lender to guarantee the interest rate offered for a mortgage provided that the loan closes within the specified period of time.
A meeting of parties involved in a real estate transaction to finalize the process. In the case of a purchase, the settlement usually involves the seller, the buyer, the real estate broker and the lender. In the case of a refinance, the settlement involves the borrower and the lender. Sometimes referred to as the closing or the close of escrow.
Settlement or Closing Fee
A fee charged by a title company, closing agent or attorney to act as a representative and agent for the lender to perform the closing of a real estate transaction.
Also referred to as the HUD-1 or the closing statement, this is the document that provides line by line detail of the financial details related to a specific real estate transaction such as the fees paid by the seller and the buyer for a purchase transaction or the fees paid by the borrower for refinances.
A fee associated with obtaining a precise measurement of a piece of property by a licensed surveyor. The survey is typically a written map of the property showing locations of buildings and boundaries. In some states a survey is required by a title company to issue a title insurance policy. For our comparison purposes, a survey fee is considered to be a third party fee and may be included in the title insurance fee by some lenders.
A fee charged by a title company to issue an insurance policy without requiring that a full survey be completed. For our comparison purposes, a survey affidavit fee is considered to be a third party fee and may be included in the title insurance fee by some lenders.
The total value of property, income, or other taxable assets subject to taxation.
A tax charged by some state or local governments at the time of transfer of real estate title from one owner to another. For our comparison purposes, these fees are considered to be a tax or other unavoidable fee.
Tax Service Fee
A fee charged to a borrower by a lender so that another company will assume responsibility for verifying the amount of real estate taxes due and that taxes have been paid over the life of the loan. For our comparison purposes, a tax service fee is considered to be a third party fee, however, some lenders may not charge for this service.
Taxes and Other Unavoidable Fees
Fees that we consider to be taxes and other unavoidable fees include State/Local Taxes and recording fees. These fees will most likely have to be paid regardless of the lender you choose. If you see a tax or recording fee in the fee comparison table that is listed by some of the sites and not others, don't assume that you won't have to pay it. It probably means that the lender who doesn't list the fee hasn't done the research necessary to provide accurate closing cost information nationwide. Contact one of the sites directly for more information or talk to your real estate agent or attorney for guidance.
The loan term is the number of months that you will make monthly payments. If the loan term is the same as the payment calculation term, you will pay the loan in full during the loan term and no balance will be due. If the payment calculation term is greater than the loan term, a balance or "balloon payment" may be due at the end of the loan term.
Third Party Fees
Third party fees are usually fees that the lender will collect and pass on to the person who actually performed the service. For example, an appraiser is paid the appraisal fee, a credit bureau is paid the credit report fee and a title company or an attorney is paid the title insurance fees. Fees that we consider third party fees include the appraisal fee, the credit report fee, the settlement or closing fee, the survey fee, tax service fees, title insurance fees, flood certification fees, and courier/mailing fees. Typically, you’ll see some minor variances in third party fees from lender to lender since a lender may have negotiated a special charge from a provider they use often or chooses a provider that offers nationwide coverage at a flat rate. You may also see that some lenders absorb minor third party fees such as the flood certification fee, the tax service fee or courier/mailing fees.
A legal written instrument evidencing a person's lawful possession of a property.
A company that specializes in examining titles to real estate and issuing title insurance.
A fee charged by a title company or attorney in some states to cover the cost of searching the public record to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue assessments, or other claims filed that would adversely affect the transfer of the title. For our comparison purposes, a title examination fee is considered to be a third party fee and may be included in the title insurance fee by some lenders.
An insurance policy that protects the lender (and sometimes the property owner as well) against loss due to disputes over the ownership of a property and defects in the title that were not found in the search of the public record. For our comparison purposes, the title insurance cost is considered to be a third party fee.
VA Funding Fee
The Department of Veteran’s Affairs (VA) charges a Funding Fee to most veterans who obtain a VA mortgage loan to help sustain the VA home loan program. Only veterans receiving VA disability are exempt from paying this fee. The VA Funding Fee is a percentage of the principal loan amount and is due at closing. The amount of the VA Funding Fee varies depending on specifics of the transaction. The full amount can usually be financed as part of the loan amount or paid in cash.
A mortgage for veterans and service persons. The loan is guaranteed by the Department of Veterans Affairs (VA) and requires low or no down payment.