House Inspections: Like homeowners insurance, we think that a house inspection is a necessity. The following should be inspected: overall condition of the property, inside and out; electrical, heating, and plumbing systems; foundation; roof; pest control and dry rot. A good house inspection can save you money by locating problems. With the inspection report in hand, your realtor can ask the seller to either do repairs or reduce the purchase price.
Interest:
Lenders usually require borrowers to pay the interest that accrues from the date of settlement to the first monthly payment.
Interest Rate:
Interest is what lenders charge you to use their money. Lenders generally charge higher rates of interest on higher risk loans. For fixed-rate mortgages, remember that the interest rate has a seesaw relationship with the points. A high number of points is usually associated with a lower interest rate, and vice versa. For an adjustable-rate mortgage, make sure that you understand the formula (the index plus the margin) that determines how the interest rate is calculated after the teaser rate expires.
Legal Fees / Attorney Fees:
Costs relating to having an attorney or law firm review and prepare the needed documents for your closing. These costs may include, deed preparation (this cost is paid for by the seller), title search, and closing packet preparation. Costs are usually around $450 to $600.
Lock In:
A lock-in is a mortgage lender's commitment and written agreement to guarantee a specified interest rate to the homebuyer provided that the loan is closed within a set period of time.
Loan Origination:
This fee is usually known as a loan origination fee but is sometimes called a "point" or "points". It covers the lender's administrative costs in processing the loan. Often expressed as a percentage of the loan, the fee will vary among lenders. Generally the buyer pays the fee, unless otherwise negotiated.
Multiple Listing Service (MLS):
MLS is a real estate agents' cooperative service that contains descriptions of most of the houses that are for sale. Real estate agents use this computer-based service to keep up with properties listed for sale by members of the Multiple Listing Service in their area.
Notary Fee:
This fee is charged for the cost of having a person who is licensed as a notary public to swear to the fact that the persons named in the documents did, in fact, sign them.
Points:
Also known as a loan's origination fee, points are interest charges paid up front when you close on your loan. Points are actually a percentage of your total loan amount (one point is equal to 1% of the loan amount). For a $100,000 loan, one point costs you $1,000 dollars.
Pre-paids/Escrow Account Deposits:
These costs are for the payment of taxes and / or insurance and other itmes that must be made at settlement to set up an escrow account. The lender is not allowed to collect more than a certain amount.
Principal:
The principal is the amount that you borrow for a loan. If you borrow $100,000, your principal is $100,000. Each monthly mortgage payment consists of a portion of principal that must be repaid plus the interest that the lender is charging you for the use of the money. During the early years of your mortgage, your loan payment s primarily interest.
Private Mortgage Insurance (PMI):
If the down payment is less than 20% of a home's purchase price, the borrower will probably need to purchase private mortgage insurance (also known as "mortgage default insurance"). Lenders feel that homeowners who can only come up with small down payments are more likely to default on their loans. Therefore, lenders make these homeowners buy PMI, which reimburses them the loan amount in case the borrower does default. Private mortgage insurance can add hundreds of dollars per year to loan costs. After the equity in the property increases to 20%, borrowers no longer need the insurance. Do not confuse this insurance with mortgage life insurance.
Property Disclosure Statement:
Some state require that sellers give prospective buyers a written disclosure regarding all known property defects and all known material facts that may affect the property's value or desirability.
Prorations:
Certain items such as property taxes and homeowners association dues are continuing expenses that must be prorated (distributed) between the buyers and sellers at closing. If the buyers, for example, owe the sellers money for property taxes that the sellers paid in advance, the prorated amount of money due the sellers at closing is shown as a debit (charge) to the buyers and a credit to the sellers.
Recording:
The cost for having the new deed recorded. This will put your name in the public records as the owner of the home. The typical cost for this recording fee is $35.
Settlement or Closing Fee:
This fee is paid to the settlement agent or escrow holder. The cost of the fee needs to be negotiated between the buyer and the seller.
Survey:
The lender may require that a surveyor conduct a property survey. This is a protection to the buyer as well as the lender. The buyer usually pays for the surveyor's fee, but sometimes this may be paid by the seller.
Tax Deductible:
Refers to payments that you may deduct against your federal and state taxable income. The interest portion of your mortgage payments, loan points, and property taxes are tax deductible.
Title Insurance:
Covers the legal fees and expenses necessary to defend your title against claims that may be made against your ownership of the property. The extent of your coverage depends upon whether you have an owner's standard coverage or extended-coverage title insurance policy. To get a mortgage, you also have to buy a lender's title insurance policy to protect your lender against title risks.
Zoning:
Certain city and county government bodies have the power to regulate the use of land and buildings. For example, the neighborhood where your house is located is probably zoned for residential use. It most likely also has zoning codes or ordinances to regulate building heights, yard sizes, and the percentage of lot covered by buildings.