Definitions of Closing Terms

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Seller’s Settlement Charges

Mortgage Company Charges

Amortization Schedule – Schedule showing principal and interest payments throughout the life of the loan.
Attorney’s Fee – Charges by independent attorney for preparation of legal documents, i.e. deed, deed of trust, note, release, etc. and for acts of representation by an attorney.
Discount Points – Points lender charges to increase the investor’s yield. May be paid by either buyer and/or seller on conventional loans and FHA loans. Must be paid by seller on VA loans. Number of points fluctuates with mortgage.
Interest Proration – Amount reimbursed to buyer from 1st of month to closing date on assumption transaction, if prorated.
Tax Service Fee – A fee required by the lender for collection and disbursement of tax escrow by a serving company.
Underwriting Fee – Fee the lender charges for underwriting for loans on behalf of the investor.
Warehouse Fee – Charges by the lender to cover his cost in borrowing funds for a short term in order to fund a mortgage prior to selling the mortgage to an investor.

Title Company Charges

Attorney’s Fee (Release) – Charge for preparation of the release of lien document when seller is paying off his existing loan.
Courier/Air Expense – Charge for pick-up and delivery of loan package or any required Federal Express charges.
Escrow Fee – Charges by title company to service transaction and to escrow money and documents. Amount varies with company. Usually split equally between buyer and seller.
Owner’s Title Policy – Insures the buyer against loss due to any defect of the title not expected to or excluded from the policy.
Recording Fee – Charged by County Clerk to record documents in the public records. Charges are based on per page recorded.
Restrictions – Certified copy of deed restrictions required by lender.
Tax Certificates – A fee required by the title company to insure no delinquent taxes and the current tax amount on property.
Tax Proration – Sellers pay buyers taxes from January 1 through the day of closing.

Miscellaneous Charges

Commission – Fee paid by seller to real estate agents for the sale of property.
Home Warranty – Private insurance insuring a buyer against defects (usually plumbing, heating, electrical) in the home purchased.
Repairs – Any repairs require by lender and/or warranted by inspections and to be paid at closing.
Payoff 1st Lien – Amount verified by lender holding mortgage to obtain full release of lien.
Termite Inspection Fee – Required by lender to show property free and clear of active termites.

Buyers’s Settlement Charges

Mortgage Company Charges

Amortization Schedule – Schedule showing principal and interest payments throughout the life of the loan.
Appraisal Fee – Fee for lender required appraisal for new loan.
Attorney’s Fee – Charges by independent attorney for preparation of legal documents, i.e. deed, deed of trust,note, release, etc. and for acts of representation by an attorney.
Credit Report – Fee Assessed by the lender for required credit information from local credit bureau.
Discount Points – Points lender charges to increase the investor’s yield. May be paid by either buyer and/or seller on conventional loans and FHA loans. Must be paid by seller on VA loans. Number of points fluctuates with mortgage.
Inspection Fee – As required by lender to show property condition.
Lender Required Reserves – Hazard or mortgage insurance premium and monthly tax amounts as indicated by lender for escrow accounts.
Origination Fee – Fee paid to lender to originate a new loan.
Tax Service Fee – A fee required by the lender for collection and disbursement of tax escrow by a serving company.
Underwriting Fee – Fee the lender charges for underwriting for loans on behalf of the investor.
VA Funding Fee – An administrative fee charged by the Veterans Administration.
Warehouse Fee – Charges by the lender to cover his cost in borrowing funds for a short term in order to fund amortgage prior to selling the mortgage to an investor.

Title Company Charges

Courier/Air Expense – Charge for pick-up and delivery of loan package or any required Federal Express charges.
Escrow Fee – Charges by title company to service transaction and to escrow money and documents. Amount varies with company. Usually split equally between buyer and seller.
Guaranty Fee – Charge established by State Board of Insurance on each policy of title insurance issued.
Mortgagee’s Title Policy – Required by lender to insure that lender has a valid lien; does to protect buyer. Also required for 2nd mortgage if “paper” is sold to an investor.
Recording Fee – Charged by County Clerk to record documents in the public records. Charges are based on per page recorded.
Restrictions – Certified copy of deed restrictions required by lender.
Survey – Survey of property required by lender; showing lot size, easements, any encroachments, locations of improvements, etc.

Miscellaneous Charges

Assumption Fee – Fee assessed by the lender to the buyer to assume seller’s existing loan.
Escrow Balance – Buyer’s purchase of seller’s existing reserve account (i.e. taxes & insurance) in the event that the sale is a non-prorated assumption.
Homeowner’s Association Fee – Maintenance free assessed to property owners within a condominium or townhouse complex, a planned development or a single family residence subdivision.
Insurance Proration – Charged to buyer for the remainder of existing policy on prorated assumption transaction.
Maintenance Proration – Reimbursed to seller from date of closing to end of year or payment period.
Termite Inspection Fee – Required by lender to show property free and clear of active termites.