Abstract or Title Search, Title Examination, Title Insurance binder:

These charges cover the costs of the search and examination of records of previous ownership transfers, etc. To determine whether the seller can convey clear title to the property and to disclose any matters on record that could adversely affect the buyer or the lender. Examples of title problems are unpaid mortgages, judgment or tax liens, conveyance of mineral rights, leases and power line easements or road right of ways that could limit use and enjoyment of the real estate. In some areas a title insurance binder is called a commitment to insure.

Additional Costs:

This space is for listing any additional amounts owed the seller, such as reserve funds if the buyer is assuming the seller's loan. This may not be applicable to your settlement.

Additional Settlement Charges, Survey:

The lender or the title insurance company may require that a surveyor conducts a property survey to determine the exact location of the home and the lot line, as well as easements and rights of way. This is a protection to the buyer as well. Usually the buyer pays the surveyors fees but sometimes this may be handled by the seller.

Adjustable Rate Mortgage (ARM or VRM):

A mortgage where the interest rate is not fixed, but changes during the life of the loan move in line with movements in an indexed rate. You may also see ARMS referred to as AMLs (Adjustable Mortgage Loans ) or VRM( Variable Rate Mortgages). For further information, refer to the "Consumer Handbook on Adjustable Rate Mortgages."

Adjustments:

These include taxes, front footage charges, insurance, rent fuel and other items that the seller has previously paid for covering a period which runs beyond the settlement date. The costs are usually divided on a proportional basis with the seller being reimbursed for charges accruing after the date of transfer of title. See Reserve Accounts for a further discussion of these matters.

Adverse Action:

A denial of a loan in an amount and terms acceptable to the borrower.

Amounts paid by/on behalf of the borrower:

see lines (201_220).

Annual Assessments:

This reserve item covers assessments that may be imposed by subdivisions or municipalities for special improvements (such as sidewalks, sewers or paving) or fees (such as homeowners association fees).

Annual Percentage Rate (APR):

A measure of the cost of credit, expressed as a yearly rate. It includes interest as well as other charges. Because all lenders follow the same rules to ensure the accuracy of the annual percentage rate, it provides consumers with a good basis for comparing the cost of loans, including mortgage plans.

Application:

An oral or written request for an extension of credit. Usually a printed form on which the l ender collects credit, income and debt information about a prospective borrower, plus facts about the property being used to secure the loan. A fee may be charged at the time of application.

Appraisal Fee:

This charge, which may vary significantly from transaction to transaction, pays for a statement of property value for the lender made by an independent appraiser or by a member of the lenders staff. The lender needs to know if the value of the property is sufficient to secure the loan if you fail to repay the loan according to the provision of your mortgage contract, and the lender must foreclose and take title to the house. The appraiser inspects the house and the neighborhood, and considers sales prices of comparable houses and other factors in determining the value. The appraisal report may contain photos and other information of value to you, it will provide the factual data upon which the appraiser based the appraised value. The appraisal does not, however, give rights to the purchaser nor necessarily detect or discuss defects in the property or title to the property. While most reasonable lenders will furnish you with a copy of the appraisal upon request, they are not required to do so unless state law covers this situation. Therefore, it is important that you reach an understanding with your lender if you wish to see the appraisal, preferably at the time of payment of the appraisal fee. The appraisal fee may be paid by either the buyer or the seller as agreed in the sales contract. In some cases this fee is included in the mortgage insurance application fee.

Assumability:

When a home is sold, the seller may be able to transfer the mortgage to the new buyer. This means the mortgage is assumable. Lenders generally require a credit review of the new borrower and may charge a fee for the assumption. Some mortgages contain a due on sale clause , which means that the mortgage may not be transferable to a new buyer. Instead, the lender may make you pay the entire balance that is due when you sell the home. Assumability can help you attract buyers if you sell your home.

Assumption Fee:

This fee is charged for processing papers for cases in which the buyer takes over the payments on the prior loan of the seller.

Attorney's Fees:

You may be required to pay for legal services provided to the lender in connection with the settlement, such as examination of the title binder or sales contract. Occasionally this fee can be shared with the seller, if so it's stipulated in the sales contract. If a lawyer's involvement is required by the lender, the fee will appear on this part of the form. The buyer and seller may each retain an attorney to check the various documents and to represent them at all stages of the transaction including settlement. Where this service is not required and is paid for outside of closing. The person conducting settlement is not obligated to record the fee on the settlement form.

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Borrower:

The person, sometimes referred to as the mortgager, who obtains a mortgage loan.

Buy Down:

With a buy down, the seller pays an amount to the lender so that the lender can give you a lower rate and lower payments, usually for an early period in an ARM. The seller may increase the sales price to cover the cost of the buy down. Buy downs can occur in all types of mortgages, not just ARMS.

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Cap:

A limit on how much the interest rate or the monthly payment can change, either at each adjustment or during the life of the mortgage. Payment caps don't limit the amount of interest the lender is earning, so they may cause negative amortization.

Cash at settlement to/from the Borrower:

Remaining are the summary lines which are, 301_303 for the borrower, and 601_603 for the seller. Subtracting line 302, gross amount paid by or for the borrower from line 301, gross amount due from the borrower results in the net cash the borrower must pay at settlement.

City/County Property Taxes:

The lender may require regular monthly payments to the reserve account for property taxes.

Closing :

The time and date set for the transfer of the property from seller to buyer and /or for the signing of the loan documents.

Closing or Settlement Costs:

Fees, in addition to the purchase price of the property, charged at closing which include but are not limited to lawyers; fees, title search and insurance, survey charges and fees to record the deed, mortgage, and other documents.

Commission Paid at Settlement:

Sometimes the broker will retain the deposit against the sales price (earnest money) to apply towards the commission . In this case, line 703 will show only the remainder of the commission which will be paid at settlement.

Commitment Letter:

A lenders written offer to grant a mortgage loan outlining the terms, the amount of the loan, the interest rate, and any other conditions. It can also serve as a communication of the lenders decision on the borrowers application.

Contract Sales Price:

This is the price of the home agreed to in the sales contract between the buyer and seller.

Conversion Clause:

A provision in some ARMS that allows you to change the arm to a fixed rate loan at some point during the term. Usually conversion is allowed at the end of the first adjustment period. At the time of the conversion, the new fixed rate is generally set at one of the rates then prevailing for fixed rate mortgages. The conversion feature may be available at extra cost.

counteroffer:

An offer made by the lender to grant credit other than in the amount or terms requested by the applicant.

Credit Report Fee:

This fee covers the cost of the credit report, which shows how you have handled other credit transactions. The lender uses this report in conjunction with information you submitted with the application regarding your income, outstanding bills, and employment, to determine whether you are an acceptable credit risk and to help determine how much money to lend you. Where you encounter credit reporting problems you have protection under the fair credit laws as summarized under" Home Buyer's Rights".

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Deposit or Earnest Money:

This is the amount which you paid against the sales price when the sale contract was signed. It is credited to the purchase.

Discount:

In an ARM with an initial rate discount, the lender gives up a number of percentage points in interest to give you a lower rate and lower payments for part of the mortgage term, usually for one year or less. After the discount period, the ARM rate will probably go up depending on the index rate.

Division of Commission:

If several brokers or sales agents work together to sell the home the commission may be split among them. If they are paid from funds collected for settlement, this is shown on lines 701_702.

Document Preparation:

This may be a separate document fee that covers preparation of final legal papers such as the mortgage, the deed of trust, note or deed. You should check with the settlement agent to see that these services, if charged for are not also covered under some other service fees.

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Federal and state laws that prohibit discrimination in the granting of credit based on race, color, religion, national origin, sex, marital status, age, or whether a person is receiving public assistance or alimony.

Escrow Accounts:

Money collected in advance by the lender, usually on a monthly basis, for the payment of real estate taxes, betterment, and /or insurance.

Existing Loans:

If you are taking over the sellers mortgages instead of obtaining a new loan, the amount still owed on those prior loans will be shown here.

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Fixed Rate Mortgage:

A conventional mortgage loan with a set interest rate and equal monthly payments for the entire term of the loan.

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Government Recording and Transfer Charges:

These fees may be paid either by borrower or seller, depending upon your contract when you buy the home or accept the loan commitment. The borrower usually pays the fees for legally recording the new deed and mortgage. (Line 1201). These fees, collected when property changes hands or when a mortgage loan is made, may be quite large and are set by state and/or local government. City, county and/or state tax stamps may have to be purchased as well (lines 1202_1203).

Gross Amount Due:

This is the total of line's 101_112

Gross Amount Due from the Borrower:

Page 1 of the HUD_1 settlement statement summarizes all actual costs and adjustments for the borrower and the seller, including total settlement fees and charges found on line 1400 of section L.

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The lender determines the amount of money that must be paid in the reserve account in order to pay the next insurance premium when due.

Hazard Insurance Premiums:

This premium prepayment is for insurance protection for you and the lender against loss due to fire, windstorm, and natural hazards. This coverage may be included in a homeowner's policy which insures against additional risks which may include personal liability and theft. Lenders often require payment of the first year's premium at settlement. A hazard insurance or homeowner's policy may not protect you against a loss caused by flooding. If your mortgage is federally insured and your property is within a special flood hazard area identified by FEMA you may be required by federal laws to carry flood insurance on you home. Such insurance maybe purchased in participating communities under the National Flood Insurance Act.

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Index:

The index is the measure of interest rate changes that the lender uses to decide how much the interest rate on an ARM will change over time. No one can be sure when an index rate will go up or down. To help you get an idea of how to compare different indexes, you should ask your lender how the index for any ARM you are considering has changed in recent years, and where it is reported.

Interest:

Lenders usually require that borrowers pay at settlement the interest that accrues on the mortgage from the date of settlement to the beginning of the period covered by the first monthly payment. For example, suppose your settlement takes place on April 16, and your first regular monthly payment will be due on June 1. To cover interest charges from the month of May, on the settlement date, the lender will collect interest for the period from April 16 to May 1. If you borrowed $60,000.00 at 12 percent interest, the interest item would be 303.30. This amount and the per diem charges will be entered on line 901.

Items required by Lender to be paid in advance:

You may be required to prepay certain items, such as accrued interest, mortgage insurance premium and hazard insurance premium, at the time of settlement.

Items payable in connection with Loan:

These are the fees which lenders charge to process, approve and make the mortgage loan.

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Lender:

The entity or person, sometimes refereed to as the mortgagee, who offers the mortgage loan.

Lenders Inspection Fee:

This charge covers inspections, often of newly constructed housing, made by personnel of the lending institution or an outside inspector.( Pest or other inspections made by companies other than the lender are discussed in later sections)

Lenders Title Insurance:

A one time premium may be charged at settlement for a lenders title policy which protects the lender against loss due to problems or defects in connection with the title . The insurance is usually written for the amount of the mortgage loan and covers losses due to defects or problems not identified by title search and examination. The borrower may pay all, a part or none of this cost depending on the terms of the sales contract or local custom.

Lien:

A legal claim, granted by contract or by court, against property. A mortgage is one kind of lien.

Loan Origination:

This fee covers the lenders administrative costs in processing the loan. Often expressed as percentage of the loan, the fee will vary among lenders and from locality to locality. Generally the buyer pays the fee unless another arrangement has been made with the seller and written into the sales contract.

Loan to Value Ratio:

The percentage comparison between the unpaid principal balance of the mortgage and the sales price or the appraised value of the property, whichever is lower.

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Margin:

The number of percentage points the lender adds to the index rate to calculate the ARM interest rate at each adjustment.

Mortgage:

A lien placed by the lender on the borrower property and recovered when the note has been paid in full. If the borrower defaults on the note, the lender can sell the property to satisfy the debt.

Mortgage Insurance Premium:

Mortgage insurance protects the lender from loss due to payment default by the borrower. The lender may require you to pay your first premium or a lump sum premium covering the life of the loan in advance on the day of settlement. The premium may cover a specific insurance protection if the lender is willing to make a large loan, thus reducing your down payment requirements. This type of insurance should not be confused with mortgage life, credit life, or disability insurance designed to pay off a mortgage in the event of physical disability or death of the borrower.

Mortgage Insurance Application Fee:

This fee covers processing the application for private mortgage insurance which may be required on certain loans. It may cover both the appraisal and application fee.

Mortgage Review Board:

A voluntary board consisting of an equal number of lenders and community representatives who will review the residential mortgage loans denied by participating lenders when the applicants believe the denial was based on the location of the property.

Mortgage Insurance:

The lender may require that part of the total annual premium be placed in the reserve account at settlement. The portion to be placed in reserve may be negotiable.

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Negative Amortization:

Amortization means that monthly payments are large enough to pay the interest and reduce the principal on your mortgage Negative amortization occurs when the monthly payments do not cover all of the interest cost. The interest cost that isn't covered is added to the unpaid principal balance. This means that even after making many payments, you could owe more than you did at the beginning of the loan. Negative amortization can occur when an ARM has a payment cap that results in monthly payments not high enough to cover the interest due.

Notary Fee:

This fee is charged for the cost of having a licensed person affix his or her name and seal to various instruments authenticating the execution of these documents by the parties.

Note:

The borrowers legally binding written promise to repay a debt to a lender on a specified date.

Owner's Title Insurance:

This charge is for owner's title insurance protection and protects you against losses due to title defects. In some areas its is customary for the seller to provide the buyer with an owners policy and for the seller to pay for this policy. In other areas, if the buyer desires an owner's policy he or she must pay for it.

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Personal Property:

If at the time the sales contract was made, you and the seller agreed that some items were to be transferred with the home, the price of those items is entered here. If it was agreed to include these items in the price of the home, their cost will be part of the sales price recorded on line 101. Personal property could include items such as carpets, drapes, stove ,refrigerator, etc.

Pest and other Inspections:

This fee is to cover inspections for termite or other pest infestation of the home. This may be important if the sales contract included a promise by the seller to transfer the property free from pests or pest caused damage. Be sure that the inspection shows that the property complies with the sales contract before you complete the settlement . If it does not you may wish to require a bond or other financial assurance that the work will be completed. This fee can be paid either by the borrower or seller depending upon the terms of the sales contract. Lenders vary in their requirements as to such an inspection. Fees for other inspections such as for structural soundness, are entered on line 1303.

Points:

An often nonrefundable sum of money a point is equal to one percent of the principal amount of you mortgage. For example, if you get a mortgage for 65,000, one point means you pay $650 to the lender. Lenders frequently charge points in both fixed rate and adjustable rate mortgages in order to increase the yield on the mortgage and to cover loan closing costs. These points usually are collected at closing and may be paid by the borrower or the home seller, or may be split between them. Charged by the lender to cover certain costs of making a loan, the number of points that maybe charged is limited by law.

Principal amount of new loan:

This is the amount of the mortgage that you will repay to the lender in the future.

Private Mortgage Insurance:

Protection for lenders against borrower default, Paid for by the borrower and usually required when the down payment is less than 20% of the purchase price

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Rate Lock:

Agreement/interest rate commitment. A written agreement by which lenders will hold an interest rate on a mortgage for a specified period of time. The terms and conditions of a rate lock agreement vary from lender to lender.

Real Estate Settlement Procedures Act:

A federal law that requires a good faith estimate of closing costs required to be given on certain first mortgages. For further information, refer to the booklet entitled" Settlement Costs.

Reserves deposited with Lenders:

Reserves (sometimes called escrow or impound accounts) are funds held in an account by the lender to assure future payment for such recurring items as real estate taxes and hazard insurance. You will probably have to pay an initial amount for each of these items to the reserve account at the time of settlement. A portion of your regular monthly payments will be added to the reserve account. R.E.S.P.A. places limitations on the amount of reserve funds which may be required by the lender.

Right of Recision:

State and federal laws that allow consumers who refinance first mortgages and create second mortgages to cancel their contract and receive a refund of all fees. This must take place within 3 business days following the closing or following the delivery of the required information and recision forms & disclosures, whichever occurs last.

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Sales Brokers Commission:

This is the total dollar amount of sales commission, usually paid by the seller. Fees are usually a percentage of the selling price of the home and are intended to compensate brokers or sales agents for their services. Custom and /or the negotiated agreement between the seller and the broker determine the amount of the commission.

Secondary Mortgage Market:

Investors who purchase residential mortgages originated by lenders.

Settlement or Closing Fee:

This fee is paid to the settlement agent. Responsibility for payment of this fee should be negotiated between the seller and buyer at the time the sales contract is signed.

Settlement Charges to Borrower:

The total charges for the borrower detailed in section l and totaled on line 1400 are recorded here. This figure includes all of the items payable in connection with the loan, items required by the lender to be paid in advance, reserves deposited with the lender, title charges, government recording and transfer charges, and any additional related charges.

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Title Search:

An examination of legal records to check the validity and completeness of the title to the property. The title search should uncover any liens, overdue assessments, or other claims against the property.

Title Charges:

These charges may cover a variety of services performed by title companies and others and include fees directly related to the transfer of title (title examination, title search, document preparation) and fees for title insurance, legal charges , which include fees for lenders sellers or buyers attorneys or the attorney preparing title work and fees for settlement agents and notaries. The specific charges discussed in connection with lines 1101to 1109 are those most frequently incurred at settlement. Due to the great diversity in practice from area to area, your particular settlement may not include all of these items or may include. other not listed. Ask your settlement agent to explain how these fees relate to service performed on your behalf.

Title Insurance:

The total cost of owner\owners and lenders title insurance is shown here. The borrower may pay all, a part of none of this cost depending on the terms of the sales contract or local custom.

Total Amounts paid by/for Borrower:

This is the sum of lines 201_ 219

Total Settlement Charges:

All the fees in the borrowers column entitled "paid from borrowers funds at settlement are totaled here and transferred to line 103 of section J, settlement charges to borrower in the summary of borrowers transaction on page 1 of the HUD 1 settlement statement. All the settlement fees paid by the seller are transferred to line 502 of section k , summary of sellers transaction on page I of the HUD 1 settlement statement.

Truth in Lending:

Federal and state laws that require lenders to provide borrowers with full disclosure of the true cost of a loan and easy to understand information about the annual percentage rate and terms of the loan.

Urea Formaldehyde Insulation (UFI)Notice:

A state law requiring borrowers or sellers to disclose to a lender the absence or presence of UFI and the formaldehyde level in a dwelling.

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