Special Report Exposes All Of The Terms And Fees That Are Charged To Buyers At Settlement
All lenders and brokers are required to provide you with a Good Faith Estimate detailing the services you may be required to get and pay for in connection with your loan.
This Good Faith Estimate will give you a way to compare loans and see what your closing costs would be. Below you will find a list of coded names that describe the different fees, which may be associated with the services previously mentioned. These codes and names correspond to those found on the HUD-1 Settlement Statement.
Broker's Fees
Lender Fees
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802 - Loan Discount Fee Discount Points Often called "points", is a one-time charge to you from lender to lower the interest rate on your loan. Generally, the more points you pay, the lower your rate. Each point is 1% of the loan amount. For example, if you have a loan amount of $100,000, one point would cost you $1000. Sometimes you will see offers with negative points. Negative points refer to money paid to you that can be used to offset your other closing costs. You will usually see a higher interest rate with negative points.
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804 - Credit Report Fee This fee covers the cost of obtaining a credit report, which shows how you have handled other credit transactions. The lender uses this report in conjunction with information you submitted with your Q-form regarding your income, outstanding bills, and income to determine whether you are an acceptable credit risk, how much the lender can loan you and at what interest rate.
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807 - Assumption Fee The assumption fee is a charge to you, if you take over the existing mortgage on the house you are purchasing. For example, if you are buying an existing house from someone you may have the option to take over the mortgage that the seller is paying.
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822 - Flood Certification Fee Since your house is collateral for your loan, the lender wants to be sure the property is not in a flood zone. This fee covers obtaining a report from the Federal Emergency Management Agency (FEMA) that indicates whether or not your property is in a flood zone. If your home is located in a flood zone, you will need to get flood insurance. Most homeowner insurance policies do not cover flood damage. This only covers the report and not the insurance if needed.
Lender Pre-paid Items
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901 - Interest Lenders require you to pay the interest due on your mortgage from the close date to the first day of the following month. The interest due is calculated using the loan's interest rate, the loan amount and the number of days until your first payment. For example, if you close on the 11th of March, you will pay 21 days interest (3/11-3/31) assuming your first payment is May 1st. Mortgage interest is always collected in arrears therefore you will pay the April interest in the May payment using the example above.
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903 - Hazard Insurance Premium Since the property is collateral for the loan, you will be required to insure your house. At closing, you must pay the first year's premium or prove that you already have coverage (if refinancing). If you are purchasing a condominium, your association policy will already cover your unit and you will not need to make this payment. Homeowner's insurance covers you against damage from fire, wind, and other natural hazards. Flood damage is usually not covered by a Homeowner's Insurance Policy.
Escrow Account Deposits
An escrow account is an account used when the lender will be paying your homeowners insurance and property taxes on your behalf. You prepay the amounts and the lender pays the costs as they come due. You will probably have to pay an initial amount to start the reserve account.
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1001 - Hazard Insurance This fee represents the amount the lender withholds to ensure you pay your homeowner's insurance on time. Typically, the lender will require you to pay two months of premiums at closing, and then the remaining payments are included in your monthly payments.
Title Charges
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1110 - Owner's Title Insurance This fee covers the part of the title insurance policy that protects the owner against loss due to disputes over ownership of the property. The owner's policy is not necessary for a refinance transaction as the existing policy remains in full force and effect, if obtained when you purchased your house, for as long as the owner owns the property.
Government Fees
Additional Settlement Charges
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1301 - Survey Fee Your lender may require a surveyor to conduct a survey of your property. A survey determines the exact location of the home and the lot line, as well as, easements and rights of way. This also protects you to ensure you have record of your property boundaries and size.
(Mortgage Web Success, LLC., 2007)
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