Mortgage Banking Glossary of Terms

Abstract Exam
A public record search exam is done to insure that both you and the lender are aware of any liens or encumbrances that could affect the property.

Adjustable Rate Mortgage (ARM)
An adjustable rate mortgage, commonly referred to as an ARM, is a loan type that allows the lender to adjust the interest rate during the term of the loan.  Generally, these changes are determined by a margin and an index so that the interest rate changes, up or down, are based on market conditions at the time of the change.  Most often these interest rate changes are limited by a rate change cap and a lifetime cap.  If you apply for an adjustable rate mortgage, the lender is required to provide you with an ARM Program Disclosure which spells out the terms of the loan.

Administrative Fee
A fee charged by some lenders to cover the administrative costs of processing your loan request.  For our comparison purposes, this fee is typically a lender fee.

Amortization
A loan repayment plan, which enables the borrower to reduce his debt gradually through monthly payments of principal and interest.

Annual Percentage Rate (APR)
To make it easier for consumers to compare mortgage loan interest rates, the federal government developed a standard format called an "Annual Percentage Rate" or APR to provide an effective interest rate for comparison shopping purposes.  Some of the costs that you pay at closing are factored into the APR.  Your actual monthly payments are based on the interest rate, not the APR.

Application
The process of applying for a mortgage. The term "application" generally refers to a form that is used to collect financial information from a borrower by a lender.

Application Deposit
Funds required by some lenders in advance of the processing of a loan request.  Generally a deposit is collected to cover the costs of an appraisal and credit report and may or may not be refundable.

Appraisal
An analysis performed by a qualified individual to determine the estimated value of a home.  In order to verify that the value of your home supports the loan amount you request, an appraisal will be ordered by the lender. The appraisal is generally performed by a professional who is familiar with home values in the area and may or may not require an interior inspection of the home. The fee for the appraisal is commonly passed on to the borrower by the lender.

Assumable Mortgage
A loan that does not have to be paid in full if the home is sold.  Instead, the new owner can take over payments on the existing loan and pay the seller the difference between the sales price and the balance on the loan.

Attorney Witness
Related to the settlement/closing fee.  This fee is standard in some states and is the closing attorney's fee for witnessing the signing of the closing documents.  For our comparison purposes, an attorney witness fee is considered to be a third party fee and may be included in the title insurance or closing fee by some lenders.

Balloon Mortgage
A short-term fixed-rate loan which involves smaller payments for a certain period of time and one large payment for the entire balance due at the end of the loan term.

Bi-weekly mortgage
A mortgage that requires payments to be made every 2 weeks rather than every month.  Payments made at this frequency will reduce the loan balance faster than payments made monthly.

Binder
An agreement between a buyer and seller to purchase real estate.  A binder, also known as an offer to purchase or a sales contract, secures the right to purchase real estate upon agreed terms for a limited period of time.  If the buyer changes his mind or is unable to purchase, the earnest money that was paid is forfeited unless the binder expressly provides that it is to be refunded.

Binder Deposit
A sum of cash paid to a seller by a buyer prior to the closing to show that the buyer is serious about buying the house.  The binder deposit is deducted from the purchase price at closing and is not an additional cost.  Sometimes referred to as earnest money.

Bridge Loan
Sometimes called a "swing loan", a bridge loan is generally a loan that is secured by a borrower's current residence to obtain the funds needed to purchase a new home if the current residence will not be sold prior to the purchase of a new home.

Buydown
A process that allows a borrower to obtain a lower interest rate on a mortgage by paying discount points to a lender.  A temporary buydown will reduce the interest rate paid during the first few years of the loan.  A permanent buydown reduces the interest rate over the entire life of the loan.

Cap
Refers to a provision of an adjustable rate mortgage (ARM) that limits how much the interest rate or payment can increase or decrease.

Cash Out Refinance
A refinance loan that provides the borrower with cash that exceeds the amount required to pay off existing mortgages on the home.  This additional cash can be used by the borrower for any purpose.

City/County Tax Stamp
A tax that is required in some municipalities if a property changes hands or a new mortgage is obtained.  The amount of this tax can vary with each state, city and county.  For our comparison purposes, this fee is considered a tax or other unavoidable fee.

Close of Escrow
A meeting of the parties involved in a real estate transaction to finalize the process.  In the case of a purchase, the close of escrow usually involves the seller, the buyer, the real estate broker and the lender.  In the case of a refinance, the close of escrow involves the borrower and the lender.  Sometimes referred to as the settlement or closing.

Closing Costs
The total of all the items that must be paid at closing related to your new mortgage.

Closing Statement
Also referred to as the HUD-1 or the settlement statement, this is the document that provides line by line detail of the financial details related to a specific real estate transaction such as the fees paid by the seller and the buyer for a purchase transaction or the fees paid by the borrower for refinances.

Commitment Letter
A written offer from a lender to provide financing to a borrower.  The commitment letter states the terms under which the lender agrees to provide financing to the borrower.  Also called a loan commitment.

Condominium
A form of real estate ownership in which each owner has title to a specific unit in a project and joint ownership in the common areas of the project.

Conforming Loan
A loan that does not exceed the maximum loan amount allowed for the most common mortgage investors.  Currently, the maximum loan amount is $252,700.  Loans that exceed this amount are referred to as "jumbo mortgages".  The cost of obtaining a jumbo mortgage is generally higher than the cost of obtaining a conforming mortgage.

Construction Loan
A short term loan that is used to finance the construction of a new home.  During the term of the loan the lender makes payments to the builder as the work progresses and the borrower makes interest payments on only the funds that have been disbursed to the builder.  Typically, the construction loan is refinanced into a permanent loan after the home is completed.

Contingency
A condition that must be met before a contract is legally binding.  For example, a lender's commitment to provide financing to a borrower may be contingent on receipt of an acceptable appraisal.

Conventional Mortgage
A mortgage that is not insured or guaranteed by a government agency.

Convertible ARM
An adjustable rate mortgage (ARM) that allows a borrower to convert their mortgage to a fixed rate loan for the remainder of the loan term if certain conditions are met.

Cooperative (Co-op)
A type of real estate ownership in which residents of a multi-unit property own shares of the corporation that owns the property.  The ownership of these shares gives the owner the right to occupy a unit in the building.

Cost of Funds Index (COFI)
An index that may be used to determine the interest rate changes of an adjustable rate mortgage (ARM).  The Cost of Funds Index, or COFI as it is commonly called, is the weighted average of interest rates that Federal Home Loan banks have paid to their customers recently.  Usually, the COFI for the 11th district of Federal Home Loan Banks is used and covers banks in California, Nevada, and Arizona.  The index value is announced on the last working day of the month following the month listed.  For comparison purposes here is the value of the index for the month of June over the last 10 years:
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1989 - 8.650
1990 - 8.086
1991 - 7.155
1992 - 5.258
1993 - 4.050
1994 - 3.804
1995 - 5.179
1996 - 4.809
1997 - 4.853
1998 - 4.881
1999 - 4.504

Cost of Savings Index (COSI)
An index that may be used to determine the interest rate changes of an adjustable rate mortgage (ARM).  The Cost of Savings Index, or COSI as it is commonly called, is based on money borrowed from consumers in the form of deposits and then lent out as home mortgages from Golden West Financial, a 40 billion dollar parent company of World Savings.  The interest rates in effect on the deposits are the basis for the Cost of Savings index.  The COSI is not not based on actual interest paid on deposit accounts, but rather the weighted annualized rate of all interest rates in effect on the last day of the month.  For comparison purposes here is the value of the index for the month of June over the last 10 years:
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1990 - 7.940
1991 - 7.110
1992 - 5.170
1993 - 4.200
1994 - 3.770
1995 - 5.330
1996 - 4.930
1997 - 5.070
1998 - 5.010
1999 - 4.520

Credit Report
A record of an individual's current and past debt repayment patterns.  A credit history helps a lender to determine whether a borrower has a history of repaying debts in a timely manner.  For our comparison purposes, the credit report fee is considered to be a third party fee.

Deed
The written instrument that conveys a property from the seller to the buyer.  The deed is recorded at the local courthouse so that the transfer of ownership is part of the public record.

Deed of Trust
This document, referred to as a mortgage in some states, pledges a property to a lender or trustee as security for the repayment of a debt.

Deed Stamp
A tax that is required in some municipalities if a property changes hands.  The amount of this tax can vary with each state, city and county.  For our comparison purposes, this fee is considered a tax or other unavoidable fee.

Deed-in-lieu
A process that allows a borrower to transfer the ownership of a property to the lender in order to avoid loss of the property through foreclosure.

Default
A breech of the agreement with a lender such as the failure to make loan payments in a timely manner.

Delinquency
The failure to make payments on debts when they are due.

Deposit
Funds required by a lender in advance of the processing of a loan request.  Generally a deposit is collected to cover the costs of an appraisal and credit report and may or may not be refundable.

Discount Points
Fees that are collected by the lender in exchange for a lower interest rate.  Each discount point is 1% of the loan amount.  For our comparison purposes, a discount point is considered to be a lender fee.  To determine if it is wise to pay discount points to obtain a lower rate, you must compare the up front cost of the points to the monthly savings that result from obtaining the lower rate.  Sometimes referred to as "points".

Document Preparation
Lenders will prepare some of the legal documents that you will be signing at the time of closing, such as the mortgage, note, and truth-in-lending statement.  This fee covers the expenses associated with the preparation of these documents.  For our comparison purposes, the document preparation charges are considered to be a lender fee.

Documentary Stamp
A tax levied by some local or state governments at the time the deeds and mortgages are entered into public record.  For our comparison purposes, documentary stamps are considered to be a tax and other unavoidable fee.

Down Payment
The portion of the purchase price of a property that the borrower will be paying in cash rather than included in the mortgage amount.

Earnest Money
A sum of cash paid to a seller by a buyer prior to the closing to show that the buyer is serious about buying the house.  The earnest money is deducted from the purchase price at closing and is not an additional cost.  Sometimes referred to as a binder deposit.

Encumbrance
Anything that affects the title to a property such as a mortgage, judgement, or easement.

Equal Opportunity Act (ECOA)
The federal regulations that requires lenders to make credit equally available to all without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

Equity
An owner's financial position in a property.  Equity is the difference between the property's value and the amount that is owed on mortgages.

Escrow
Funds paid by one party to another to hold until a specific date when the funds are released to a designated individual.  Generally, an escrow account refers to the funds a mortgagor pays to the lender along with their monthly principal and interest payments for the payment of real estates taxes and hazard insurance.  This is also referred to as impounds.  The money is held by the lender to make payments when they are due. An escrow can also refer to funds that are held by a third party to insure the completion of repairs or improvements that must be completed on the property but that cannot be done prior to closing.

Escrow Account
The account that funds are held in by the lender for the payment of real estate taxes and/or homeowner's insurance.  Can also refer to the account that funds are held in for the completion of repairs or improvements to a property that cannot be completed prior to closing.

Fair Credit Reporting Act
A federal consumer protection regulation that controls the disclosure of credit information and establishes procedures for correcting mistakes in your credit file.

Fannie Mae (FNMA)
One of the congressionally chartered, publicly owned companies that is the largest source of home mortgage funds.

Federal Housing Administration (FHA)
An area of the U.S. Department of Housing and Urban Development (HUD) that insures low downpayment mortgages granted by some lenders.  The loan must meet the established guidelines of FHA in order to qualify for the insurance.

FHA Mortgage
A mortgage insured by the Federal Housing Administration (FHA).  FHA loans are also known as a government mortgage.

First Mortgage
A mortgage that is the first loan recorded in the public record and generally the primary loan against a property.

Fixed Rate Mortgage
A mortgage in which the monthly principal and interest payments remain the same throughout the life of the loan.  The most common mortgage terms are 30 and 15 years.  With a 30-year fixed rate mortgage your monthly payments are lower than they would be on a 15 year fixed rate, but the 15 year loan allows you to repay your loan twice as fast and save more than half the total interest costs.

Float
A term that describes the interest rate for a loan that has not yet been guaranteed by a lender.  If the lender has not yet guaranteed or locked the interest rate, it is floating and could change prior to closing.

Flood Certification
An inspection to determine if a property is located in an area prone to flooding also known as a flood plain.  The federal government determines whether an area is in a flood plain.  Lenders generally rely on the flood certification to determine if flood insurance will be required in order to obtain a mortgage.  For our comparison purposes, the cost of the flood certification is considered to be a third party fee, though you may find that all lenders do not pass this fee on to the borrower.

Flood Insurance
Insurance that protects a homeowner from the cost of damages to a property due to flooding or high water.  It is required by law for properties located in areas prone to flooding to have flood insurance.  The federal government determines whether an area is prone to flooding and considered to be in a flood plain.

Foreclosure
The legal process in which a borrower's ownership of a property is dissolved due to default.  Typically, the property is sold at a public auction and the proceeds are used to pay the loan in full.

Freddie Mac
One of the congressionally chartered, publicly owned companies that is the largest source of home mortgage funds.

Good Faith Estimate
A written estimate of the closing costs the borrower will have to pay at closing.  Under the Real Estate Settlement Procedures Act (RESPA), the lender is required to provide this disclosure to the borrower within three days of receiving a loan application.

Hazard Insurance
Insurance that protects a homeowner against the cost of damages to property caused by fire, windstorms, and other common hazards.  Also referred to as homeowner's insurance.

Homeowner's Insurance
Insurance that protects a homeowner against the cost of damages to property caused by fire, windstorms, and other common hazards. Also referred to as hazard insurance.

Housing Ratio
A standard calculation performed by mortgage lenders to determine if a borrower qualifies for a specific loan type.  It is calculated by dividing the monthly housing expense (Principal, Interest, Taxes and Insurance) by the borrower's monthly gross income.  Also referred to as a front-end ratio or a top ratio.

HUD
HUD, also known as the U.S. Department of Housing and Urban Development, insures home mortgage loans made by lenders meet minimum standards for such homes.

HUD-1 Statement
Also referred to as the closing statement or the settlement statement, this is the document that provides line by line detail of the financial details related to a specific real estate transaction such as the fees paid by the seller and the buyer for a purchase transaction or the fees paid by the borrower for refinances.

Impounds
An impound refers to the funds a mortgagor pays to the lender along with their monthly principal and interest payments for the payment of real estates taxes and hazard insurance.  This is also referred to as an escrow account.  The money is held by the lender to make payments when they are due.

Index
A published interest rate used to establish the interest rate offered on an Adjustable Rate Mortgage (ARM).  Some of the most common indices are treasury bills, treasury securities, London Inter-Bank Offering Rates (LIBOR) and the Cost of Funds Index (COFI).

Interest Rate
The cost of borrowing a lender's money.  Interest takes into account the risk and cost to the lender for a loan.  The interest rate on a fixed rate mortgage depends on the going market rate and how many discount points you pay up-front.  An adjustable rate mortgage's interest is a variable rate made up of the index and the lender's margin.

Judgement Search Fee
A fee charged by a title company to search the public record for judgements filed against a property owner or borrower that could ultimately encumber the title of the property.  For our comparison purposes, a judgement search fee is considered to be a third party fee.  Some lenders will include this fee in the title insurance cost.

Jumbo Mortgage
A loan that exceeds the maximum loan amount allowed by the most common mortgage investors.  Currently, a jumbo loan is any loan in an amount that is greater than $252,700.  The cost of obtaining a jumbo mortgage is generally higher than the cost of obtaining a conforming mortgage.  Also known as a non-conforming loan.

Lender
The bank, mortgage broker, or financial institution providing the loan funds to a borrower.

Lender Fees
Fees that are kept by the lender to cover some of their expenses and to meet their profitability goals.  Typically fees such as origination fees, discount points, processing/administration fees, underwriting fees and document preparation fees are lender fees.  This is the area of fees that you should compare very closely from lender to lender before making a decision.

Lien
A loan secured by real estate.  An encumbrance against a property for money due.  The lien can be voluntary such as a mortgage or involuntarily such as a judgement.

Lifetime Cap
Describes the maximum interest rate that can be charged for an Adjustable Rate Mortgage during the life of the loan.

Loan Commitment
A written offer from a lender to provide financing to a borrower.  The commitment letter states the terms under which the lender agrees to provide financing to the borrower.  Also called a commitment letter.

Loan Term
The number of months that you will make monthly payments.  If the loan term is the same as the payment calculation term, you will pay the loan in full during the loan term and no balance will be due.  If the payment calculation term is greater than the loan term, a balance or "balloon payment" may be due at the end of the loan term.

Loan to Value (LTV)
A ratio used by lenders to calculate the loan amount requested as a percentage of the value of a home.  To determine the loan to value ratio, divide the loan amount by the home's value.  The LTV ratio is used to determine what loan types the borrower qualifies for as well as the cost and fees associated with obtaining the loan.

Lock Period
The number of days that the lender will guarantee the interest rate offered for a loan.  In order to hold the guaranteed interest rate for a loan, the loan closing must occur during the lock period.

London Inter-Bank Offered Rates (LIBOR)
An index used to establish the interest rate of some adjustable rate mortgages (ARM).  LIBOR is the London Inter-Bank Offered Rates.  This is the interest rate at which the highest rated banks offer to lend to one another in eurodollars.  LIBOR offers various maturities, including 1-month, 3-month, 6-month and 1-year, however, the 6-month index is most common for mortgages.  LIBOR is quoted daily in the Wall Street Journal's Money Rates.  Below is a history of the 6-month LIBOR value for the month of June over the last 10 years.

1990 - 8.438
1991 - 6.563
1992 - 4.125
1993 - 3.563
1994 - 5.250
1995 - 5.875
1996 - 5.844
1997 - 5.938
1998 - 5.871
1999 - 5.633

Mansion Tax
A tax charged by some state or local governments at the time of transfer of real estate title from one owner to another particularly for high valued properties.  For our comparison purposes, this fee is considered to be a tax or other unavoidable fee.

Margin
The number of percentage points a lender adds to the index value to calculate the ARM interest rate at each adjustment period.  A published interest rate used to establish the interest rate offered on an Adjustable Rate Mortgage (ARM).  Some of the most common indices are treasury bills, treasury securities, London Inter-Bank Offering Rates (LIBOR) and the Cost of Funds Index (COFI).

Mortgage
The legal document used by a borrower to pledge their property as security in order to obtain a loan.  In some areas of the country, the mortgage is called a "deed of trust".

Mortgage Insurance
Insurance provided by a private company to protect the mortgage lender against losses that might be incurred if a loan defaults.  The borrower usually pays the cost of the insurance and is most often required if the loan amount is more than 80% of the home's value.  Sometimes referred to as private mortgage insurance.

Mortgage Registration Fee
A fee or tax charged by some state and local governments when a mortgage is obtained.  For our comparison purposes, the mortgage registration fee is considered to be a tax and other unavoidable fee.

Mortgage Tax
A tax charged by some state or local governments that is paid to the state when a mortgage is obtained.  For our comparison purposes, the mortgage tax is considered to be a tax and other unavoidable fee.

Mortgagee
The person or company who provides the loan funds to the borrower.

Mortgagor
The person who receives funds from a lender in exchange for a security interest in the property.  Commonly known as the borrower.

Offer to Purchase
An agreement between a buyer and seller to purchase real estate. An offer to purchase, also known as a binder or a sales contract, secures the right to purchase real estate upon agreed terms for a limited period of time. If the buyer changes his mind or is unable to purchase, the earnest money that was paid is forfeited unless the binder expressly provides that it is to be refunded.

On-Line Status
The ability to obtain status details about the progress of your mortgage request at the website of the lender.  This convenience allows you to learn about the status of your request anytime you'd like.

Origination Fee
A fee charged by a lender as a way to cover processing expenses or to increase their profitability for originating a mortgage loan.  Most commonly, the origination fee is expressed as a percent of the loan amount.  For our comparison purposes, the origination fee is considered to be a lender fee.

P&I
The monthly principal and interest payment required when repaying a mortgage in accordance with its terms.

PITI
(P)rincipal, (I)nterest, (T)axes, and (I)nsurance is a reference to the total monthly payment required to repay a mortgage in accordance with its term as well as monthly escrow payments for taxes and insurance.

Plat Registration
A fee charged by title companies in some states to review the registration of a public record containing maps of land, showing the division of the land into streets, blocks, and lots and indicating the measurements of the individual parcels.  For our comparison purposes, the plat registration fee is considered to be a third party fee.  Some lenders may include this fee in the cost of the title insurance.

Points
Fees that are collected by the lender in exchange for a lower interest rate.  Commonly called discount points, each point is equal to 1% of the loan amount.  For our comparison purposes, a discount point is considered to be a lender fee.  To determine if it is wise to pay discount points to obtain a lower rate, you must compare the up front cost of the points to the monthly savings that result from obtaining the lower rate.

Prepaids
Expenses of property ownership or expenses incurred while obtaining a mortgage that must be paid in advance.  Prepaids typically include real estate taxes and hazard insurance.

Prepayment Penalty
A monetary penalty charged by a lender if all or part of a loan is paid off before it is due.

Principal
The actual balance, excluding interest, of a mortgage loan.  Also refers to the amount of the monthly mortgage payment that will be applied to the actual balance.

Principal & Interest
The monthly payment required to repay a mortgage in accordance with its terms.  Sometimes referred to as "P&I".

Private Mortgage Insurance
Insurance provided by a private company to protect the mortgage lender against losses that might be incurred if a loan defaults.  The cost of the insurance is usually paid by the borrower and is most often required if the loan amount is more than 80% of the home's value.  Sometimes referred to as mortgage insurance.

Processing/Administration Fee
A fee charged by a lender to cover the administrative costs of processing a loan request.  For our comparison purposes, a processing or administration fee is considered to be a lender fee.

Public Record
A collection of legal documents that are filed with the local government registry so that the public will know what liens, encumbrances or judgements may affect any piece of real estate.

Qualifying Ratios
Calculations performed by lenders to determine your ability to repay a loan.  The first qualifying ratio is calculated by dividing the monthly PITI by the gross monthly income.  The second ratio is calculated by dividing the monthly PITI and all other monthly debts by the gross monthly income.

Rate
The annual rate of interest for a loan.  Also called the interest rate.

Rate Change Cap
The maximum amount that an interest rate can change, either at an adjustment period or over the entire life of the loan.  Commonly associated with an adjustable rate mortgage (ARM).

Rate Lock
An agreement by a lender to guarantee the interest rate offered for a mortgage provided that the loan closes within the specified period of time.

Reconveyance Fee
This fee is charged by title companies or attorneys in some states and covers the cost of removing your current lender's lien from your property title when you refinance.  For our comparison purposes, a reconveyance fee is considered to be a third party fee and may be included in the title insurance fee by some lenders.

Recording Fees
A fee charged by the local government to record mortgage documents into the public record so that any interested party is aware that a lender has an interest in the property.  For our comparison purposes, a recording fee is considered to be a tax or other unavoidable fee.

Refinance
The process of paying off any existing mortgages on a home with a new mortgage loan.

Release Fee
Release of a lien to free real estate from a mortgage.

Sales Contract
An agreement between a buyer and seller to purchase real estate.  A sales contract, also known as an offer to purchase or a binder, secures the right to purchase real estate upon agreed terms for a limited period of time.  If the buyer changes his mind or is unable to purchase, the earnest money that was paid is forfeited unless the binder expressly provides that it is to be refunded.

Sales Disclosure
State particular forms that need to be filed disclosing everything about the sale of the home.

Search and Exam Fee
A fee charged by a title company or attorney in some states to perform a check of the title records that verifies the buyer is purchasing a house from the legal owner and there are no liens, overdue assessments, or other claims filed that would adversely affect the transfer of the title.  For our comparison purposes, a search and exam fee is considered to be a third party fee and may be included in the title insurance fee by some lenders.

Search and Survey
A fee charged by a title company in some states to perform a check of the public record to verify that the buyer is purchasing a home from the legal owner and there are no liens, overdue assessment, or other claims that would adversely affect the transfer of title.  In addition, a search is performed to insure that there are no issues that a survey would show that could affect the property.  For our comparison purposes, a search and survey fee is considered to be a third party fee and may be included in the title insurance fee by some lenders.

Search Fee
A fee charged by a title company or attorney in some states to cover the cost of searching the public record to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue assessments, or other claims filed that would adversely affect the transfer of the title.  For our comparison purposes, a search fee is considered to be a third party fee and may be included in the title insurance fee by some lenders.

Security
The collateral offered to a lender in exchange for a loan.  When a lender provides a mortgage, you provide your home as the security.  This means that if payments are in default, the lender has the right to take title to the property.

Settlement
A meeting of parties involved in a real estate transaction to finalize the process.  In the case of a purchase, the settlement usually involves the seller, the buyer, the real estate broker and the lender.  In the case of a refinance, the close of escrow involves the borrower and the lender.  Sometimes referred to as the closing or the close of escrow.

Settlement or Closing Fee
A fee charged by a title company, closing agent or attorney to act as a representative and agent for the lender to perform the closing of a real estate transaction.

Settlement Statement
Also referred to as the HUD-1 or the closing statement, this is the document that provides line by line detail of the financial details related to a specific real estate transaction such as the fees paid by the seller and the buyer for a purchase transaction or the fees paid by the borrower for refinances.

State Tax Stamps
A tax charged by some state or local governments at the time of transfer of real estate title from one owner to another.  For our comparison purposes, these fees are considered to be a tax or other unavoidable fee.

State/Local Tax Fees
A tax charged by some state or local governments at the time of transfer of real estate title from one owner to another.  For our comparison purposes, these fees are considered to be a tax or other unavoidable fee.

Survey
A fee associated with obtaining a precise measurement of a piece of property by a licensed surveyor.  The survey is typically a written map of the property showing locations of buildings and boundaries.  In some states a survey is required by a title company to issue a title insurance policy.  For our comparison purposes, a survey fee is considered to be a third party fee and may be included in the title insurance fee by some lenders.

Swing Loan
Sometimes called a bridge loan, a swing loan is generally a loan that is secured by a borrower's current residence to obtain the funds needed to purchase a new home if the current residence will not be sold prior to the purchase of a new home.

Tax Certificate
A tax charged by some state or local governments at the time of transfer of real estate title from one owner to another. For our comparison purposes, these fees are considered to be a tax or other unavoidable fee.

Tax Service Fee
A fee charged to a borrower by a lender so that another company will assume responsibility for verifying the amount of real estate taxes due and that taxes have been paid over the life of the loan.  For our comparison purposes, a tax service fee is considered to be a third party fee, however, some lenders may not charge for this service.

Taxes and Other Unavoidable Fees
Fees that we consider to be taxes and other unavoidable fees include State/Local Taxes and recording fees.  These fees will most likely have to be paid regardless of the lender you choose.  If you see a tax or recording fee in the fee comparison table that is listed by some of the sites and not others, don't assume that you won't have to pay it.  It probably means that the lender who doesn't list the fee hasn't done the research necessary to provide accurate closing cost information nationwide.  Contact one of the sites directly for more information or talk to your real estate agent or attorney for guidance.

Third Party Fees
Third party fees are usually fees that the lender will collect and pass on to the person who actually performed the service.  For example, an appraiser is paid the appraisal fee, a credit bureau is paid the credit report fee and a title company or an attorney is paid the title insurance fees. Fees that we consider third party fees include the appraisal fee, the credit report fee, the settlement or closing fee, the survey fee, tax service fees, title insurance fees, flood certification fees, and courier/mailing fees. Typically, you’ll see some minor variances in third party fees from lender to lender since a lender may have negotiated a special charge from a provider they use often or chooses a provider that offers nationwide coverage at a flat rate.  You may also see that some lenders absorb minor third party fees such as the flood certification fee, the tax service fee or courier/mailing fees.

Title Examination
A fee charged by a title company or attorney in some states to cover the cost of searching the public record to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue assessments, or other claims filed that would adversely affect the transfer of the title.  For our comparison purposes, a title examination fee is considered to be a third party fee and may be included in the title insurance fee by some lenders.

Title Insurance
An insurance policy that protects the lender (and sometimes the property owner as well) against loss due to disputes over the ownership of a property and defects in the title that were not found in the search of the public record.  For our comparison purposes, the title insurance cost is considered to be a third party fee.

Title Opinion
A statement issued by an attorney as to the quality of title after examining an abstract of title.  Also, referred to as an Attorney Opinion.  For our comparison purposes, a title opinion fee is considered to be a third party fee and may be included in the title insurance fee by some lenders.

Total Closing Costs
This is the total of all the items that must be paid at closing related to your new mortgage. Since the exact charges for some of these items cannot be obtained until the time of closing, the figure may only be an estimate.

Total Debt Ratio
A standard calculation performed by mortgage lenders to determine if a borrower qualifies for a specific loan type.  It is calculated by dividing the monthly housing expense (Principal, Interest, Taxes and Insurance plus all other monthly debt obligation) by the borrower's monthly gross income.  Also referred to as a back end ratio or a bottom ratio.

Transfer Tax
A tax charged by some state or local governments at the time of transfer of real estate title from one owner to another.  For our comparison purposes, these fees are considered to be a tax or other unavoidable fee.

Transfer/Intangible Tax
A tax charged by some state or local governments at the time of transfer of real estate title from one owner to another.  For our comparison purposes, these fees are considered to be a tax or other unavoidable fee.

Treasury Bills
An index used to establish interest rates for adjustable rate mortgages.  It is based on the interest rate paid to private investors by the US Government to obtain funding for the national debt and other expenses.  Sometimes called T-bills, they come in denominations of 3-months, 6-months and 1-year.  The 3-month and 6-month Treasury bills are auctioned every Monday, and the 1-year Treasury bills are auctioned on Tuesday.  The resulting figures are released to the public the next day.  This index can have either a weekly or a monthly value.  Here is the value of the 6-month T-Bill for the month of June from 1991-1999:

1991 - 5.76
1992 - 3.81
1993 - 3.23
1994 - 4.58
1995 - 5.46
1996 - 5.26
1997 - 5.14
1998 - 5.12
1999 - 4.81

Treasury Securities
An index used to establish interest rates for adjustable rate mortgages.  It is based on the yields of actively traded 1-year, 3-year, or 5-year Treasury Securities adjusted to constant maturities.  The Treasury Security indices are calculated by the U.S. Treasury and reported by the Federal Reserve Board.  These indices have either a weekly or a monthly value.  The weekly indices are released on Monday afternoon for the previous week.  Monthly values for these indices are generally available on the first Monday of the following month.  Here is the value of the 1-year Treasury Securities monthly averages for the month of June from 1991-1999:

1991 - 6.36
1992 - 4.17
1993 - 3.54
1994 - 5.27
1995 - 5.64
1996 - 5.81
1997 - 5.69
1998 - 5.41
1999 - 5.10

Truth in Lending Act
Also known as Regulation Z, this federal regulation requires a lender to provide borrowers with a disclosure estimating the costs of the loan including your total finance charge and the Annual Percentage Rate (APR) within three business days of the application for a loan.  This act is designed to provide consumers with a standard method of comparing the financing costs from lender to lender.

Underwriting Fee
A fee charged by some lenders to cover the cost of the lender's analysis of the risk associated with a loan. For our comparison purposes, an underwriting fee is considered to be a lender fee.

VA Loan
A mortgage for veterans and service persons.  The loan is guaranteed by the Department of Veterans Affairs (VA) and requires low or no down payment.

Wire Transfer Fee
A fee charged by some lenders to cover the cost of wiring the mortgage funds to the appropriate parties, such as the title company or attorney, so that they are available for closing.

Zoning
The local government's specifications for the use of property in certain areas.

Zoning Ordinances
The acts of an authorized local government establishing building codes, and setting regulations for property usage.