ABSTRACT or TITLE SEARCH, TITLE EXAMINATION, TITLE INSURANCE BINDER
These charges cover the costs of the search and examination of records of the previous ownership, transfers, etc., to determine whether the seller can convey clear title to the property, and to disclose any matters on record that could adversely affect the buyer or lender. Examples of title problems are unpaid mortgages, judgement or tax liens, conveyances of mineral rights, leases, power line easements, or road right-of-ways that could limit the enjoyment of the real estate. In some areas a title insurance binder is called a commitment to insure.
This charge, which may vary significantly from lender to lender, pays for a statement of property value for the lender. It is generally provided by an independent appraiser. The lender needs to know if the value of the property is sufficient to secure the loan. The appraiser inspects the house and neighborhood and considers sales prices of comparable houses and other factors in determining the value. The appraisal report may contain photos and other information. It provides factual data upon which the appraiser based the appraisal value.
This fee covers the cost of reviewing the appraisal of the home. Since the property value and condition is a major consideration of the lender, considerable time is taken in this review.
This fee is charges for processing papers for cases in which the buyer takes over payments on the prior loan of the seller.
You may be required to pay for legal services provided to the lender in connection with the settlement.
This fee covers the cost of the credit report, which shows how you have handled other credit transactions. The lender uses this report in conjunction with information you submitted with the application regarding your income, out standing bills, and employment, to determine whether you are an acceptable credit risk and to help determine how much money to lend you.
There may be a separate document fee that covers preparation of final legal papers, such as mortgage, deed of trust, note or deed.
This charge covers inspections, often of newly constructed housing, made by personnel of the lending institution or an outside inspector.
A one-time premium may be charged at settlement for a lender's title policy which protects the lender against loss due to problems or defects in connection with the title. The insurance is usually written for the amount of the loan and covers losses due to defects or problems not identified by the title search and examination. In most areas this is customarily paid by the borrower.
A loan discount is a one time charge used to adjust the yield on the loan to what market conditions demand. It is used to offset constraints placed on the yield by state or federal regulations.
This fee, generally called points, covers the lender's administrative costs in processing the loan. Often expressed as a percentage of the loan amount, the fee will vary among lenders and from locality to locality. Generally the buyer pays the fee unless other arrangements have been made with the seller and written into the sales contract. (1 point = 1% of loan amount)
This fee covers processing the application for private mortgage insurance which may be required on certain types of loans.
Mortgage insurance protects the lender from loss due to payment default by the home owner. The lender may require you to pay your first premium in advance, on the day of the settlement. With this insurance protection, the lender is willing to make a larger loan reducing your down payment requirements. This type of insurance should not be confused with mortgage life, credit life, or disability insurance designed to pay off a mortgage in the event of physical disability or death of the borrower.
This fee covers the cost of obtaining a document from the city or town in which the property is located. This certificate is generated by the city or town evidencing current lien status for real estate taxes, water and sewer charges, betterments, etc.
This fee is charged for the cost of having a licensed person affix his/her name and seal to various documents authenticating the execution of these documents by the parties.
This charge is for owner's title insurance protection and protects you against losses due to title defects. In some areas it is customary for the seller to provide the buyer with an owner's policy and for the seller to pay for th is policy. In other areas, if the buyer desires and owner's policy he must pay for it.
Lenders usually require that borrowers pay at settlement the interest that accrues on the mortgage from the date of settlement to the beginning of the period covered by the first monthly payment. For example, suppose the settleme nt takes place on April 16, and your first monthly payment will be due on June 1 to cover interest charges for the Month of May. On the settlement date, the lender will collect interest for the period from April 16 to May 1. If you borrowed $100,000.00 @ 11% interest, the interest due would be $452.05.
These fees may be paid either by borrower or seller depending upon your contract when you buy the house or accept the loan commitment. These fees, collected when property changes hands or when a mortgage loan is made, may be quite large and are set by state and/or governments. City, county and/or state tax stamps may have to be purchased as well.
This fee is paid to the settlement agent. Responsibility for payment of this fee should be negotiated between the seller and buyer, at the time the sales contract is signed.
The lender or the title insurance company may require that a surveyor conduct a property survey to determine the exact location of the home and the lost line, as well as easements and rights of way. This is a protection to the buyer as well.
This fee is charged for the processing of tax escrows, it covers the cost of obtaining tax bills and disbursements to the various cities/towns.
The fee covers the cost of underwriting the loan during the review process prior to approval.