Loan Origination Fee:  This fee covers the lender's administrative costs in processing the mortgage loan.  Often expressed as a percentage of the loan, the fee will vary among lenders.  This fee can also be called "points."

Loan Discount:  Also called "points" or "discount points," a loan discount is a one-time charge imposed by the mortgage lender or mortgage broker to lower the interest rate at which the lender or broker would otherwise offer the home loan to you.  Each "point" is equal to one percent of the mortgage amount.  For example, if a mortgage lender charges two points on an $80,000, this amounts to a charge of $1600.

Appraisal Fee:  An appraisal is a written estimate or opinion of a property's value.  This estimate is prepared by a state licensed, qualified professional real estate appraiser.  The real estate appraiser is an independent third party in the mortgage transaction.  His/her job is to give an honest opinion of the value of the home being appraised based on experience, public records, recent sales of like homes, and other factors.   The closing cost associated with the home appraisal pays the professional appraiser for his/her report.

Credit Report Fee:  The mortgage lender and/or mortgage broker will obtain a report of your debts and repayment history from an independent agency that gathers and maintains such information on individuals and businesses.  The fee for the credit bureau report can be charged to you, the borrower.

Mortgage Insurance Application Fee:  Don't confuse mortgage insurance with hazard (homeowners) insurance.  Mortgage insurance protects mortgage lenders against losses caused by a borrower's default on a mortgage loan.  MI (mortgage insurance...also known as PMI or MIP), is typically required by mortgage lenders when the loan amount exceeds 80% of the home's appraised value.  The Mortgage Insurance Application Fee covers the processing of the application for mortgage insurance. 

Mortgage Broker Fee:  A mortgage broker is a individual or firm who brings mortgage borrowers and mortgage lenders together.  Mortgage Brokers are independent contractors who work with many lenders to bring progressive mortgage loan products to consumers.  Because the mortgage broker does not work for any particular lender, a separate fee is charged for his/her services. 

Prepaid Interest:    Mortgage interest accrues daily and is paid in arrears.  When you pay your mortgage payment each month, you are paying interest that has accrued over the days since your last mortgage payment.  Most mortgage payments are due on the first of the month. The mortgage payment calculation assumes thirty days interest will be paid in each payment.  Interest accrues each day from the date your loan disburses until the first payment due date.  Because your first payment may be more than thirty days from the date of closing, interest will accrue for the extra days.  The interest for those days in excess of thirty is charged at closing.  This is the pre-paid interest charge you see on your closing statement. 

Mortgage Insurance Premium:  As explained above in the "Mortgage Insurance Application Fee," the lender may require you to carry mortgage insurance on your loan.  They may require you to pay your first year's premium or a lump sum premium that covers the life of the mortgage loan, in advance, at the loan closing.  This is also known as PMI or MIP.

Hazard Insurance Premium:  Hazard Insurance (commonly know as Homeowners Insurance), protects you and the mortgage lender against loss due to fire, windstorm, and natural hazards.  Lenders often require the borrower to bring to the closing a policy that has been pre-paid for the first year or require the borrower to pay for the first year's payment at the mortgage loan closing. 

Flood Insurance:  If your property lies in a flood hazard zone as designated by the federal government, the mortgage lender will probably require flood insurance.  The cost is included as a settlement charge at the mortgage loan closing.

Escrow Account Deposits:  These deposits are the payment of taxes and/or hazard (homeowners) insurance and other items that must be made at settlement (the loan closing) to set up an escrow account. The mortgage lender is not allowed to collect more than a certain amount.  The individual item deposits may overstate the amount that can be collected. The aggregate adjustment makes the correction in the amount at the loan closing.  It will be zero or a negative amount. 

Settlement or Closing Fees:  This fee is paid to the settlement agent or title company to compensate for conducting the mortgage loan closing.

Abstract of Title Search, Title Examination, Title Insurance Binder:  These charges cover the cost of the title company services ordered by the mortgage lender or mortgage broker.  A Title Search is conducted by a licensed title company.  The title company researches court records pertaining to the property being mortgaged for the previous 42 years to assure each transaction was properly performed and recorded.  This includes deed transfers, mortgages, liens, mortgage releases, etc., for all owners during that period.  In addition, the title agent searches court records related to the potential borrower to uncover judgment liens, etc.  Essentially, the purpose of the title Exam is to uncover any hidden skeletons that might affect the mortgage lender's security interest in the property.  The cost for the Title Exam is usually $150-$250.

Title Insurance:  Title insurance is required by most mortgage lenders and is paid by the borrower.  It's purpose is to protect the mortgage lender in the event that an error was made or something was missed on the Title Search that causes the lender to suffer a loss on the mortgage loan.  For example, let's say that the title company missed a $25,000 second mortgage on a property when they performed the initial title examination.  Because no one knew that mortgage existed, it was not satisfied when the lender closed its mortgage loan on the property.  If the lender should have to foreclose the mortgage, that $25,000 mortgage loan still must be satisfied even though the lender knew nothing about it when the loan closed.  That loss will be recovered by the lender by filing a claim against the Lender's Title Insurance Policy.  The cost for this policy, which is charged to the borrower, varies by loan size and is usually around $4 per thousand borrowed.  There is no coverage for the borrower with a lender's title insurance policy even though the borrower pays the charges.  Owners Title Insurance policies are available for purchase and afford the same protection to the homeowner as the mortgage lender's policy affords the mortgage company.

Document Preparation:  This is a separate fee that some mortgage lenders or title companies charge to cover their costs for preparation of final legal papers, such as a mortgage, deed of trust, note or deed.

Notary Fee:  This fee is charged by the licensed notary public for his/her services during the loan closing.

Government Recording and Transfer Charges:  These fees cover legally recording the new deed and/or mortgage with the county.  Transfer taxes and conveyance charges may also be charged on home purchases. 

Survey:  The lender may require a licensed surveyor to conduct a property survey.