Allowable Fees/ Closing Costs

Are charges or fees, which are allowed to be charged to the Buyer per FHA and VA guidelines.

Amortization Schedule

A schedule of each payment due on a mortgage loan showing the amount applied to principal, the amount applied to interest and the remaining principal balance due.

Annual Percentage Rate

This is not the note rate on your loan. It is the rate, which represents the total cost of the loan, including finance charges.

Appraisal Fee

The fee charged by the lender for a written report (appraisal) by a qualified person setting forth an opinion of a property’s fair market value.

Appraisal Review

A review of the written appraisal by a qualified person to reconfirm the property’s fair market value (second opinion required by the lender).

Credit Report

A report by a credit-reporting agency used by Lenders to determine the credit-worthiness of an applicant.

Deed of Trust

Some states, like California, do not record mortgages. Instead, for real estate a deed of trust is used and recorded as security for repayment of a note.

Document Preparation Fee

The fee charged by the lender for drawing loan documents.

Documentary Transfer Tax

A state tax on the sale of real property, based on the sale price or equity transferred, being $.55 for each $500 of the taxable amount in most states. Some states use $1.10 per $1,000. This tax is imposed on each recorded document in which real property is sold. (Some cities charge a similar tax as well).

Down Payment

Cash portion of the amount of the purchase price.

Earnest Money

An amount of money, given as part of the purchase price, deposited to a third party (escrow holder) by a person purchasing property and held in a trust account until the transaction is completed.

Escrow

The use of a neutral third party who carries out the wishes of the Buyer and Seller in a real estate closing.

FHA (Federal Housing Administration)

An agency of the U.S. Department of Housing and Urban Development. Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money or plan or construct housing.

FHA Loan

A loan that is insured by the Federal Housing Administration (FHA). Along with VA loans, an FHA loan will often be referred to as a government loan.

Fire Insurance

An insurance policy that covers against loss or damage by fire to a specific property (structure only).

Flood Certification

The fee the lender charges to verify whether a property is located in a federally designated flood zone.

Flood Insurance

Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood zones.

Funding Fee

The fee the lender charges for arranging for the release of the loan funds to the title company.

Grant Deed

A written instrument by which title to or an interest in real property is transferred from one person or legal entity to another.

Homeowners Association (HOA)

(1) An association of people who own homes in a given area, formed for the purpose of improving or maintaining the quality of the area. (2) An association formed by the builder of condominiums or planned developments, and required by statute in some states. The builder’s participation as well as the duties of the association is controlled by statute.

Homeowners Insurance

An insurance policy that covers property and contents

Home Warranty

Private insurance usually paid for by the Seller, insuring a Buyer against defects (usually plumbing, heating, and electrical) in the home he has purchased. The period of insurance varies from company to company but is typically for a one-year period.

Impound Account

An account held in trust by the lender in which the borrower places monthly deposits with the lender for the payment of taxes, insurance and other purposes.

• Fire Insurance Impounds Money held by the lender for the payment of Fire Insurance – an insurance policy that covers against loss or damage by fire to a specific property (structure only)
• Flood Insurance Impounds Money held by the lender for the payment of Insurance that compensates for physical property damage resulting from flooding
• Mortgage Insurance Premium Impounds Money held by the lender for the payment of Insurance that insures the lender against loss caused by the Borrower’s failure to make the loan payments
• Property Tax Impounds Money held by the lender for the payment of property taxes levied on real property based on the value of the property

Interest

The percentage of an amount of money, which is paid for the use of that money over a period of time.

Loan Amount

The principal sum of money a borrower receives from a lender for the purchase of real estate.

Loan Discount Points

A point is one percent of the loan amount. When referring to mortgages or deed of trust, the term is used to describe the percentage of discount rather than interest. “Points” are usually paid by the Seller in FHA and VA insured loans, and by either Buyer or Seller (or both) in conventional loans. “Points” are charged by the lender to adjust the interest rate to the required yield.

Loan Origination Fee

A one-time setup fee charged by the lender.

Mortgage Insurance

Insures the Lender against loss caused by the Borrower’s failure to make the loan payments.

Non-Allowable Fees/Closing Costs

Are charges or fees, which are not allowed to be charged to the Buyer per FHA and VA guidelines. Non-Allowables are not the same for FHA and VA transactions.

Non-Recurring Closing Costs

Are charges or fees which only occur one time; i.e., escrow fee, title insurance policy, recording fees, document preparation, notary fees, loan origination, loan discount points, inspection fees, underwriting-basically anything that is a one-time fee and will not be paid again.

Notary

One who is authorized by the state or federal government, to administer oaths, and to attest to the authenticity of signatures.

Payoff Statement/ Demand

A statement from a lender showing the amount due on a loan to be paid.

Payoff Statement Fee/ Demand Fee

Fee a lender charges to provide a statement showing the amount due on a loan.

Photo Inspection Fee

Fee charged by the lender for the underwriter to review and compare the appraiser’s photos of property with pertinent information in the appraisal package.

Preliminary Change of Ownership Report

To be completed by Buyer (transferee) prior to the transfer of subject property in accordance with Section 480.3 of the Revenue and Taxation Code in California. This report must be filed with each conveyance in the County Recorder’s office for the county where the property is located, and will be used by the County Assessor to update property tax rolls.

Prepayment Penalty

An agreement to pay a penalty for the payment of a note before it actually becomes due.

Principal

The amount of a debt outstanding.

Processing Fee

The fee charged by the mortgage broker (lender) to process the borrowers’ loan.

Property Hazard Disclosure Report

California has several laws (California Civil Code 1103) regarding natural hazard and environmental disclosures during real estate transactions. This report is paid for by the seller and provides the buyer with information about the property including Special Flood Hazard Areas, Earthquake Fault Zones, and other Statutory Natural Hazards.

Property Taxes

A tax levied on real property based on the value of the property.

Prorations

The allocation of property taxes, interest, HOA dues, insurance premiums, rental income, etc. between buyer and seller proportionate to time of use.

• HOA Prorations Formula: monthly dues divided by 30 days equals per day amount (per diem) times the days that the party owns the property
• Property Tax Prorations Formula: 6 months taxes divided by 180 days equals per day amount (per diem) times the number of days the party owns the property
• Rent Prorations Formula: monthly rent divided by 30 days equals per day amount (per diem) times the days that the party owns the property

Real Estate Broker Fees (Commission)

Broker compensation typically paid by the Seller for services rendered.

Reconveyance

The document that is evidence that the Deed of Trust affecting real property has been paid in full and that the lender and the trustee no longer have any interest in the property.

Reconveyance Fee

The fee charged by the trustee for issuing the deed of reconveyance. This deed is issued after the loan has been paid off upon request to do so by the beneficiary (lender) of that trust deed.

Recordation

Filing instruments for public record (and notice) with the county recorder.

Recording Fees

The amount paid to the county recorder’s office in order to make a document a matter of public record.

Recurring Closing Costs

Are items, which will occur more than once; i.e., property taxes, interest, fire insurance, homeowners association dues, mortgage insurance, etc. These fees are paid each month or year during ownership of the property.

Sub-Escrow Fee (Title Company Charge)

Fee charged by the title company for handling loan funds and disbursing loan payoffs.

Tax Service

Fee charged by the lender for a service that notifies the lender of property tax amounts and/or delinquencies.

Termite Completion

The document issued by the termite company showing that any required termite work listed on the termite inspection has been completed on the building.

Termite Inspection Report

An inspection required in certain types of sales of property, to determine if termites are present within a building.

Title

The evidence of ownership of real property.

Title Insurance Policy

Insurance against loss or damage resulting from defects in title to a particular parcel of real property.

• Owners Title Insurance Policy Protects the Owner/Buyer against loss due to a defect in the title
• Lenders Title Policy A policy which protects the Lender in the event of a loss due to a defect in title
• Title Endorsements Additional title insurance coverage required by the lender, paid by the Buyer

Transaction Coordinator Fee

Fee paid by the buyer, seller or both for a transaction coordinator to assist the real estate agent. The coordinator will make sure all broker-required documentation for the broker’s file is complete. The coordinator may also assist in ordering required inspections on the subject property; such as termite inspection, home inspection, hazard disclosure reports, appraisal, etc.

Underwriting Fee

The fee charged by the lender to determine the risk analysis of a Borrower’s loan package.

VA (Veteran’s Administration) Loan

Housing loans to veterans by banks, savings and loans or other lenders, which are insured by the Veteran’s Administration, enabling veterans to buy a residence with little or no down payment.

Warehouse Fee

Fee charged by the lender for the depositing of loans by the lender such as a mortgage company, and a bank, for sale at a later date. This is done when the mortgage company wishes to assemble a block of loans for sale, or when the company believes that the discount rate is dropping and the loan maybe sold for a higher price in the future.

Wire Transfer Fee

The fee charged by the lender, title company, escrow company or bank for transferring or receiving wired funds on behalf of the Buyer or Seller in a real estate transaction.