Mortgage Glossary
Closing Costs
Closing costs are the fees and expenses paid at the time a mortgage transaction is finalized. They typically range from 2 to 5 percent of the loan amount and include charges such as the appraisal fee, title insurance, origination fees, attorney fees, and prepaid items like homeowners insurance and property taxes. Closing costs can sometimes be negotiated with the seller or rolled into the loan amount.
Related Terms
Escrow
Escrow refers to a neutral third-party account used during the home buying process and throughout the life of your mortgage. During the purchase, an escrow company holds funds such as earnest money until all conditions of the sale are met. After closing, your lender may maintain an escrow account to collect and pay your property taxes and homeowners insurance on your behalf as part of your monthly mortgage payment.
Title Insurance
Title insurance is a policy that protects the buyer and lender against claims or disputes over property ownership. Before closing, a title company searches public records to verify the seller has clear legal ownership and that there are no liens, encumbrances, or other issues that could affect the transfer. If a problem arises after closing, title insurance covers the legal costs and potential losses. There are two types: lender's title insurance, which is required, and owner's title insurance, which is optional but recommended.
Underwriting
Underwriting is the process by which a lender evaluates your financial profile to determine whether to approve your mortgage application. The underwriter reviews your credit history, income, assets, debts, and the property appraisal to assess the overall risk of the loan. This step typically takes several days to a couple of weeks. The underwriter may request additional documentation or clarification before issuing a final decision, which will be approved, conditionally approved, suspended, or denied.
Ready to Get Started?
Take the first step toward your dream home. Apply online in minutes or schedule a free consultation.