In hopes of broadening your understanding of the settlement fees as listed on the Settlement Statement, the following "plain language" explanation of each Settlement Charge is included:
Loan Origination Fee: compensates the lender for making and processing the loan. This charge along with loan discount fees and loan placement fees are often times referred to as point(s). The number of points paid by this Purchaser is freely negotiable. In FHA cases, the maximum allowable loan amount may be reduced if the Purchaser does not pay the loan origination fee. Your real estate agent or mortgage banker can you more details.
Appraisal Fee: Most lenders have a maximum loan they will make in relation to the purchase price of the property. To determine if the loan amount applied for is within the lender's acceptable loan to value ration, an appraisal procured.
Credit Report: This charge pays for an inspection of the borrower's credit-worthiness.
Document Preparation: This fee compensates the lender for its preparation of loan documentation for settlement.
Tax Service Fee: Sometimes referred to as TRETS or Real Estate Tax Service Fee, this one-time charge pays for the establishment and maintenance of an account with your lender for the purpose of escrowing and paying property taxes.
Mortgage Insurance Premium: (Frequently called "PMI") In most instances, with Conventional Loans, where a Purchaser's down payment is less than 20% of the purchase price of the property, lenders will require the Purchaser to pay for a mortgage insurance policy.
Reserves Deposited With Lender: In a situation where the lender will be paying the Hazard Insurance and/or Mortgage Insurance Premiums, where applicable, and/or Property Taxes, the borrower will, at settlement, usually be required to deposit into an escrow account maintained by the lender a certain portion of each of these annual obligations.
Title Charges: These charges are generated as a result of the services performed or arranged for by the Title Company.
Settlement Fee: This fee varies from one settlement firm to another. Our present charge to the Purchaser for conducting the Settlement is $250.00. In the event that the Purchaser is getting a First and Second Trust loan to buy this property, at the time of closing there will be an additional settlement fee of $125.00.
Abstract or Title Search: This charge reimburses a title abstractor for the actual cost incurred in procuring the title search (i.e. a search of the history of the ownership of the property being purchased). This cost for a D.C. transaction would be $200.00.
Title Examination: The fee compensates BFG Title and Settlements for the examination of the title search.
Title Insurance Binder: In advance of closing, the lender, if applicable, requires that the settlement firm provide a commitment or certification which ensures that a title insurance policy will be issued after settlement protecting the lender in the amount of the loan.
Document Preparation: Usually $65.00 - $75.00.
Title Insurance: This figure is a one-time premium for an insurance policy which protects against defects in or liens or encumbrances on the title, which may effect the marketability of the property, such as: inconsistent deed descriptions, missing heirs, fraudulent conveyances, un-released or defectively released prior liens, improper indexing, typographical errors, etc.
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