Glossary of Financing Terms

Closing Costs Expenses incurred in the closing of a real estate or mortgage transaction. Purchaser's Expenses normally include: cost of title examination, premiums for title policies, survey, attorney fee, lender's service fees and recording charges. In addition, the purchaser may have to place in escrow a sum of money to cover accrued real estate taxes and insurance.

Equity The difference between the market value of property and the homeowner's indebtedness (mortgage).

Impound Account/Escrow Payment The portion of a mortgagor's monthly payment held in trust by the lender to pay for taxes, hazard insurance, mortgage insurance, lease payments and other items as they become due, known as impounds in some states.

Mortgage Insurance Premium (MIP) The consideration paid by a mortgagor for mortgage insurance either to FHA or a private mortgage insurance (PMI) company. This insurance protects the investor from possible loss in the event of a borrower's default on a loan.

Origination Fee A fee or charge for work involved in the evaluation, preparation and submission of a proposed mortgage loan.

Point One percent of loan amount.

Prepayment Penalty A fee paid to the mortgagee for paying the mortgage before it become due. Also known as prepayment fee or reinvestment fee.

Private Mortgage Insurance (PMI) Insurance written by a private company protecting the mortgage lender against loss occasioned by a mortgage default.

Title Insurance An insurance policy which protects the insured (purchaser or lender) against loss arising from defects in title.

Provided by American Way Real Esate Co.,Inc