COMMON MORTGAGE & FINANCE TERMS

LOAN ORIGINATION FEE: This is a fee charged by most lenders that covers the lender's administrative costs in processing the loan. (Usually 1% of the loan amount).

LOAN DISCOUNT POINTS: sometimes referred to as "discount points." This is a charge by the lender to increase the lenders return on the money he is lending. (This is called increasing the lender's "effective yield.") For example: If the lender is charging an interest rate of 10% that you will pay in your monthly payment, but he wants an effective yield on 10 ½%, the other ½% will be collected by charging "points." Points are usually paid up front at the closing but sometimes are financed. Four points would be charged in order to gain the ½% increase yield to the lender. To figure out what points will cost, you must multiply the loan amount times the number of points being charged. (EX: A loan amount of $50,000 x 4 points (.04) equals a charge of $2,000.)

APPRAISAL FEE: This is a fee that is usually collected at the time of application to have the property appraised.

CREDIT REPORTS: The lender will order a credit report to substantiate that the loan applicant is "credit worthy." This fee is usually collected at application.

PRE-PAID INTEREST: This is a fee that is usually collected at closing to cover interest that accrues from the date of closing to the end of the month. EX: If a closing took place May 17th, the first payment would be due July 1st. Since there is no payment collected June 1st, prepaid interest is collected for the time period from the date of closing to the end of the month (from May 17th through May 30th). The payment that is made July 1st collects the interest for the month of June.

ATTORNEY'S FEES: A fee to the attorney for searching the title and closing the transaction.

TITLE INSURANCE: A one-time premium paid at closing that protects the lender from loss due to a defect in the title.

RECORDING FEES: A fee charged to cover the cost of recording the deed and the mortgage.

SURVEY: A surveyor conducts a survey to locate the position of the lot lines.