ALTA
Policy and ALTA Endorsements
An
insurance premium charged by the title company to insure the lender
that your loan is a first lien on the property. The fee is based
on the loan amount. The lender is the beneficiary. ($120-300).
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Appraisal
A fee charged
by an appraiser to render an opinion of market value as of a specific
date. Required by most lenders to obtain a loan.
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Assignment
A fee charged
by the lender to cover the expense of the transfer of the loan.
($25-50).
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Bringdown
Endorsement
A fee charged
by the lender to cover the expense of selling the loan to the ultimate
investor. It includes additional title insurance. ($50-250).
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Credit
Report
A fee charged
by the lender to obtain the credit history of the buyer(s). ($35-60).
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Discount
Point (or Points)
The amount
paid either to maintain or lower the interest rate charged. Each
point is equal to one percent (1%) of the loan amount (i.e., two
points on a $100,000 mortgage would equal $2,000).
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Document
Preparation
A fee charged
by the lender for the preparation of documents necessary to fund
the loan. ($100-250).
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Down
Payment
The difference
between the purchase price and that portion of the purchase price
being financed. Most lenders require the down payment to be paid
from the buyer's own funds. Gifts from related parties are sometimes
acceptable, and must be disclosed to the lender.
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Escrow
A fee charged
by the escrow as a neutral third party to carry out the procedures
necessary to transfer ownership of property. ($100-200).
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Flood
Insurance
A form of hazard
insurance that may be required by the lender as a condition of making
the loan. May not cover personal property.
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Insurance
The first annual
premium, plus 2 months, for fire and extended coverage insurance
to cover loss of the property. Usually called Homeowners Insurance.
In the event of a condominium property, coverage for personal property
(contents) may also be needed. ($250-1,250).
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Interest
Adjustment or Prepaid Interest
An estimated
amount of interest due at closing, usually from the date of closing
to the end of the month.
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MIP/PMI
Impound
MIP/PMI Impound
An amount for MIP/PMI required under certain circumstances and collected
by the lender and held in the impound account to insure that adequate
funds are available to pay the next years premium. Usually equivalent
to 2 months of the annual premium.
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MIP/PMI
Premium
An insurance
premium to protect the lender against loss incurred should you default.
Given the extra protection of insurance, lenders will loan you a
higher percentage of the value or purchase price of your home. MIP,
or Mortgage Insurance Premium, is paid on government-insured loans
(FHA or VA loans) regardless of your LTV (loan-to-value). Should
you pay off a government-insured loan in advance of maturity, you
may be entitled to a small refund of MIP. PMI, or Private Mortgage
Insurance, is paid on those loans which are not government-insured
and whose LTV is greater than 90%. When you have accumulated 20%
of your home's value as equity, your lender may waive PMI at your
request. Please note that such insurance does not constitute a form
of life insurance which pays off the loan in case of death.
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New
Loan Escrow
A fee charged
by the escrow company to carry out the additional procedures necessary
when a new loan is created by a lender in connection with a purchase.
(Usually included with the escrow fee above).
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Origination
A loan processing
fee charged by the lender for originating a new loan. (Usually 1%
of the loan amount, or one "point").
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Owner's
Title Policy
An insurance
premium charged by the title company to insure the buyer that the
title is free from defects up to the date the conveying instrument
is recorded. Buyer is the beneficiary. (Frequently paid by the seller.
$300 and up).
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Payoff
or Payment Penalty
A penalty
found in a Promissory Note imposed by the lender when the loan is
paid before it is due.
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Payoff
Statement
A fee charged
by the lender or collection company for payoff information on a
loan which you are paying in full.
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Prepaid
Interest
The amount
of interest to cover the period from close of escrow until the beginning
of the first payment.
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Reconveyance/Satisfaction
A fee charged
by the lender to execute the Deed of Reconveyance, or Satisfaction,
when an existing note is paid off.
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Recording
Fees
Fees charged
by the County Recorder's Office for recordation of Deed, Mortgage
or Deed of Trust, and, at times, additional documents requiring
public notice. ($10-50).
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Tax
Impound
An amount
for taxes required and collected by the lender/collection agent
and held in the impound account to insure adequate funds are available
to pay the taxes. The amount is based upon one month's worth (one-twelfth)
of yearly taxes, varying between one and five months, depending
upon the time of the year in which you close.
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Tax
Service
A fee charged
by the lender to insure that the tax bill is mailed to the lender
for payment from the appropriate impound account. ($40-65).
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Underwriting
A fee charged
by the lender to approve the loan. ($50-250).
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VA
Funding Fees
A fee charged
by the Veteran's Administration to guarantee the loan to a qualified
veteran. Similar to Private Mortgage Insurance.
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Warehouse
A fee charged by the lender to cover the expense incurred between
funding and the sale of the loan to the ultimate investor. ($50-250).
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