LOAN ESTIMATE - This is the official legal document required to begin your loan. Licensed Mortgage Loan Originators should provide you with a Loan Estimate within 3 business days of receiving a complete application. Remember your application is not complete without a copy of all income related documents (W2s, 1099s, etc.), current income related documents (current paystub) as well as a full credit report. Without these items and a completed application form a Loan Officer cannot create a valid Loan Estimate.
LOAN DISCOUNT POINTS - This is the charge from the lender or bank for the rate you are receiving. You can "buy down" the rate by paying "discount points" on your loan. These costs are listed in Section A of your Loan Estimate as Origination Costs.
ORIGINATION FEE - The cost paid to the Licensed Mortgage Loan Originator to complete the transaction. This is a commission paid to the MLO or Loan Officer.
LOAN APPLICATION - Also known as a URLA (Universal Residential Loan Application) or a 1003. This is the basic document needed to begin the loan process.
ADMIN OR UNDERWRITING FEE - This is a fee charged by the lender or bank for their underwriting work on the file. These fees are set by the lender and non-negotiable.
THIRD PARTY PROCESSING FEE - This is a fee paid to a licensed 3rd party loan processor to assist your file. Most lenders require the Mortgage Loan Officer to include a processor to assist with paperwork and other non-critical tasks so the loan officer can focus on helping the client.
APPRAISAL FEE - This is a fee paid to a licensed AMC (Appraisal Management Company) who hires a licensed appraiser to conduct an independent property value evaluation on the subject property. Loan officers are not allowed to speak with appraisers, so a AMC is used to facilitate the process.
TITLE FEES - Fees paid to a licensed title company to conduct the closing and issue a Title Insurance Policy on the home. This covers the lender in case of any possible disputes in ownership of the property.
TRANSFER TAXES - Taxes paid to the State or County for transferring the deed to the real property.
DOC STAMP TAXES - Taxes paid typically to the local County for the issuance of a new Deed and/or Mortgage that is a recorded document.
RECORDING FEES - Fees paid to the county clerk of courts to record the final transaction including the deed and the note with the county records.
SETTLEMENT FEE/ESCROW FEE/CLOSING FEE - Fee paid to the title or escrow company to close the transaction and issue the title commitment and title insurance.
PREPAIDS - Prepaid fees on your mortgage loan, including partial interest for a partial month as well as payment of any insurance policies needed to close your home purchase.
ESCROW - The collection of an escrow account for taxes and insurance is a common practice for most banks and lenders. Typically a coushion of 3 months is required to fund an initial escrow on a loan.
ESCROW WAIVER - Most lenders charge a small fee to be able to waive your esrow account. This allows you to close a loan with no escrow fees needed to be funded at closing. This would require the borrower to pay their own taxes and insurance outside of the loan and the closing.
PROPERTY TAXES - Taxes charged at the county level for basic services to the property. Some areas may have additional fees assessed via the property taxes for things such as garbage collection, water, sewer and other public works projects.
HAZARD INSURANCE - Insurance to cover general hazards such as fire and water damage. Typically windstorm or "Hurricane" insurance is covered under a separate policy or separate endorsement on the policy.
FLOOD INSURANCE - Typically if the property is in a Flood Zone, as determined by the FEMA Flood Maps, then Flood Insurance will be required by all lenders. NFIP (National Flood Insurance Program) allows any homeowner to purchase up to $250,000 of coverage, the maximum a lender can enforce by law.
LENDER CREDIT - The opposite of "Discount Point", this is a cash credit from the lender for choosing a higher rate for your mortgage loan. The cash lender credit can then be applied to any closing costs besides the Box A Origination Costs.
SELLER CREDIT - A credit given by the seller of a home to the new purchaser of the home towards closing costs. These credits may typically not exceed 3% of the purchase price of the home and may not be used to reduce the down payment, only towards closing costs.
REALTOR CREDIT - Much like a Seller Credit, the Realtor Credit is another form of an "Interested Party Contribution" and typically capped at 3% of the purchase price. Much like a seller credit this cash credit can only be used towards closing costs, not a down payment or to reduce the purchase amount.