Glossary of Closing Cost Terms

The mortgage world has unique terms and calculations that we feel every First Time Home Buyer should be aware of and the context that they most mortgage terms might be used. Here are the most common terms you should know if you’re seeking down payment assistance.

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A

ALTA (American Land Title Association) Statements

This form has replaced the HUD settlement statement. With every loan closing the borrower receives a detailed breakdown of closing costs.

Appraisal Fee

Charge to obtain a statement of property value for the lender so that the lender can know if the property value is sufficient to secure the loan.

B

Brief Legal

This is the legal description of the property being sold.

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D

DOC Stamps on Deed (aka state tax/stamps)

In real estate transactions, this equals 70 cents per thousand dollars based on the purchase price of the property. A revenue stamp attached to deeds, wills, and the like for payment of taxes. This money is due to the County Clerk in the county that the property is located.

DOC Stamps on Mortgage (aka state tax/stamps)

In real estate transactions, this equals 35 cents per thousand dollars based on the total loan amount on the property. This money is due to the County Clerk in the county that the property is located.

Document Preparation Fee

Covers preparation of final legal papers including the mortgage, deed, etc.

E

Escrow Officer

The individual from the title company who is charged with reconciling the lender's loan package with the property taxes, home insurance, flood insurance, title insurance, and various loan closing costs.

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H

Homeowner's insurance

Protects the buyer and the lender against loss due to fire, storms and other natural disasters and hazards. It may also insure against additional risks including personal liability and theft.

I

Intangible Tax on Mortgage

Fees collected when property changes hands or when a mortgage loan is made. This fee equals .35%. They are set by, and paid to, state and local governments.

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K


L

Lender Inspection Fee

Covers the cost of the appraisers final inspection to ensure the home is complete.

Loan Number

The loan number is associated with the borrower's loan on all closing documents and internal lending documents.

Loan Origination Fee

Covers the lender's administrative costs in processing the loan. It is often figured as a percentage of the loan amount.

Loan Discount Fee

(Also called points): A one-time charge used to adjust the yield on the loan to what the market conditions demand. Each point is equal to one percent (1%) of the loan amount.

M

Mortgage Title Insurance

Protects the lender against loss due to problems in connection with the title not identified by a title search. It is usually written for the amount of the mortgage loan.

Mortgage Insurance Premium (MIP)

For FHA loans, the MIP is 1.75% of the loan amount. For USDA loans, the up-front mortgage insurance is 1%.
This is not the same as the monthly mortgage insurance cost. The monthly mortgage insurance premium is .85% divided by 12 months of the loan amount. The USDA monthly mortgage insurance premium is .5% divided by 12 months of the loan amount.

N


O

Owner's Title Insurance

The charge for the owners to obtain title insurance protection, protecting the owners against losses due to title problems.

P

Private Mortgage Insurance

Protects the lender from loss due to payment default by the borrower. With this insurance, the lender is willing to make a larger loan, which in turn reduces the down payment amount required. This insurance should not be confused with Mortgage Life, Credit Life or Disability Insurance, which are designed to pay off a mortgage in the event of death or disability of the borrower.

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S

Survey Fee

The lender requires that a surveyor conduct a property survey to determine the exact location of the home and lot lines, as well as easements and rights of way. This is done to protect both the lender and the homebuyer.

satisfaction of mortgage

A certificate that is issued by the mortgagee when a mortgage is paid in full. This document is called the release of mortgage or discharge of mortgage.

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