M O R T G A G E
The Good Faith Estimate (GFE) attached is an estimate of the fees you may have to pay for the purchase of
your new home – my goal is to provide an accurate reflection of the costs you will pay at settlement. The fees
are listed by line item number as they will appear on your HUD-1 settlement sheet.
801 & 802.
Origination Fees and Discount Points- These are used to buy down (lower) your interest rate. One Point
is equal to 1% of the principle amount of the mortgage.
Appraisal Fee- This fee is only collected on FHA & VA loans – not conventional. Appraiser’s job is
to determine the property value based upon similar (comparable) properties in the surrounding area,
and will try to find properties with similar features, such as the number of bedrooms, bathrooms and
other characteristics, that have sold and settled within the last 6 months.
Credit Report Fee- This fee is only collected on FHA & VA loans – not conventional. We use a “Tri-
Merge” credit report, which comes from the three credit bureaus: TransUnion, Experian, and Equifax.
Processing Fee- This is a bank fee charged for the processing of your loan. The Processor’s job is to
verify your employment, banking information and credit history, and then prepares the loan for
Underwriting Fee- The Underwriter’s job is to review processing’s package for accuracy and
compliance with investor guidelines.
Third Party Fees
Application Fee- This fee is collected on conventional loans only. The Application Fee is collected to
pay for services ordered at initial application - namely the Appraisal and Credit Report Fees.
Administration Fee- this is a fee from the Real Estate Agent’s office.
Flood Life of Loan Fee- Federal law requires us check you are not in a flood zone.
Tax Service Fee- Charged on all loans by a company which oversees payment of taxes from escrow
account loans or to check that taxed have been paid on loans without escrow accounts.
Attorney Fees (The Title Company used is your choice as a borrower)
Settlement or Closing Fee- This is what the Attorney charges to conduct the settlement.
Abstract or Title Search- An examination of public records, laws, and court decisions to insure that no
one except the seller has a valid claim to the property and to disclose the past and current facts
regarding ownership of Real Estate. It also searches for issues like tax liens, unpaid mortgages, or
covenants that could inhibit the buyer’s use and enjoyment of the property.
Title Examination Fee- A person is hired to review the title search to make sure that it was done
Title Insurance Binder- A fee for issuing title insurance protecting both the lender and buyer prior to
closing. The binder is the Title Company’s agreement to provide Title Insurance. The title must be clear
for the lender to acquire first-lien position once the existing mortgage is paid off.
Title Insurance- A one-time premium required by the lender for a policy that insures against any losses
to the property that results from defects in the title or deed for a given piece of property. A similar policy
for your protection is optional, but highly recommended.
Recording Fee- Deed- This is a fee that is charged for filing the deed to make them a matter of public
City/County Tax Stamps- Deed- These are the taxes charged to you by the city where you purchase
State Tax Stamp- Deed- These are the taxes charged to you by the state where you purchase your
Recordation Tax- This is the tax that is charged by the Government for taking the property out of the
seller’s name and recording it in the purchaser’s name.
Survey/Plat/Improvement Certification- Measurement of land prepared by a registered Land Surveyor
showing the location of the land with reference to known points, its dimensions, and the location and
dimensions of any improvements.
Pest Inspection Fee- If you are choosing a VA loan a pest inspection is required – it is optional on FHA
and conventional loans.
Capital Contribution / Condo / HOA Dues – The amount collected for the capital contribution is dictated
by the homeowners association but is typically 1-2 months association fees. The Condo fee/HOA
collected at settlement is a pro rata portion based on the day you settle through the end of the month.
The above items are called Closing Costs. These are non-recurring costs. I estimate these costs on the high
end so that you can be more financially prepared to purchase your property.
The following fees are designated as Prepaid Expenses. These are fees are recurring fees that are paid in
advance and during the life of the loan:
Interim Interest - This is interest owed for the day you settle through the end of the month. Until you
have a ratified contract I take a very conservative approach and assume you will settle on the 15th of the
month – your estimate will reflect up to 17 days of interim interest. We can always adjust this number
up or down at your preference.
Mortgage Insurance Premium- With the exception of FHA and VA loans, this fee can be avoided by
putting 20% down or by taking out a second mortgage, which can serve as a “down payment”.
Mortgage Insurance is written to protect the lender against any loss incurred by mortgage default, thus
enabling the lender to lend a higher percentage of the sales price (up to 100%).
Fire and Hazard Insurance Premium: 1 Year- You must pay for your homeowner’s insurance 1 year in
Flood Insurance: 1 Year- If it is determined that your property is in a flood zone, federal law requires you
purchase flood insurance coverage.
Hazard Insurance Escrow - In addition to paying your insurance premium 1 year in advance, the bank
will establish an Escrow Account for you at the settlement table. This is an account in your name where
the bank has access to draw funds for the purpose of paying the hazard insurance.
Property Tax Escrow: 3-13 Months- The amount of taxes collected reflects any taxes required by the
jurisdiction you are purchasing in and the amount you will be reimbursing the seller for anything he has
paid in advance. In MD investors are required to pay taxes annually, not semi-annually.
Aggregate Accounting Adjustment- By law we are allowed to keep a cushion of 2 month’s taxes and
insurance escrow. When we have determined the amount we will be collecting will be in excess of the 2
month allowable cushion we give you a credit at settlement to ensure we will be in compliance with
Together, your Prepaid Items and Closing Costs total the estimated amount that you will need to bring to the
settlement table. If the seller is willing to pay for some of your settlement costs, that amount will be deducted
from the total on the GFE. Also deducted will be your earnest money deposit, application fee and pre-paid
hazard insurance premium.
I hope this helps you understand the various settlement charges involved when purchasing a home. If you have
any questions, please feel free to contact me!
Pam Evans & Phil Glover