What are the common fees in the mortgage process?

  • Application Fee –  An application fee may frequently include charges for property appraisal and a credit report.
  • Appraisal Fee – A fee charged by an appraiser to render an opinion of market value as of a specific date. Required by most lenders to obtain a loan.

  • Processing Fee – This fee is paid at closing. The Processor is the person who handles all paperwork requirements in getting your loan approved. He/She obtains verification's from your bank, employer, and other sources.

  • Title Search and Insurance Fees – The fee related to a check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding and Title Insurance to protect the lender (lender’s policy) or the buyer (owner’s policy) against loss arising from disputes over ownership of a property.
  • Origination Fee – The fee charged by a lender to cover administrative costs incurred during the processing of the loan, often expressed as a percentage of the loan amount.
  • Recording Fees – Fees charged by the County Recorder’s Office for recordation of Deed, Mortgage or Deed of Trust, and, at times, additional documents requiring public notice.

What are the steps in the mortgage process? 

How does an escrow work?

  • An escrow account is a separate account that holds funds for the purpose of paying bills such as homeowner’s insurance and property taxes. Funds to cover these expenses are deposited into the account each month along with your monthly payment and then pays the bills for you when they come due. By taking the annual amounts charged for homeowner’s insurance, property taxes and other annually paid items and dividing them by 12, the escrow department establishes a payment amount that is added to your monthly principal and interest payment. Spreading the cost of these expenses over 12 months makes it easier for you to budget those expenses, and you won’t have to come up with additional cash when bills are due. For most loans, an escrow account is a requirement.

What is the difference between interest rate and APR?

  • Interest Rate – The interest rate is the cost of borrowing the principal loan amount. It can be variable or fixed, but it’s always expressed as a percentage.
  • Annual Percentage Rate (APR) – The cost of credit on a yearly basis, expressed as a percentage. Required to be disclosed by the lender under the federal Truth in Lending Act, Regulation Z. Includes up-front costs paid to obtain the loan, and is, therefore, usually a higher amount than the interest rate stipulated in the mortgage note. Does not include title insurance, appraisal, and credit report.

What is private mortgage insurance (PMI)?

  • Private Mortgage Insurance is provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults. Private Mortgage Insurance is generally required for a loan with an initial loan to value (LTV) percentage in excess of 80%. In most cases, this will mean that you will have to pay Private Mortgage Insurance if your down payment is less than 20% of the value of the home you are purchasing or refinancing.