MCCF

Frequently Asked Questions About Real Estate Law:

Q: Does the banks' lawyer represent me at a closing?
A: No. You should retain your own attorney to make sure your interests are represented.

Q: What is a HUD Settlement Statement (HUD-1)?
A: This is a summary of the financial portion of the real estate transaction. The HUD will list the purchase price, loan amount, closing costs for both buyer and seller and show all pro-rations and sums to be disbursed by the title company to all parties.

Q: What are the fees & points associated with a loan?
A:

• Loan Origination and/or Discount Points: Expressed in points, it is a fee, which is equal to 1% of the loan amount. The points will vary with the interest rate the lender charges: the lower the interest rate, the higher the points.
  
• Processing Fee: A fee charged by the lender for processing the loan application.
  
• Administration or Document Fee: A fee charged by the lender for preparing the loan document in addition to the underwriting fee.
  
• Underwriting: A fee charged by the lender for underwriting the loan.
  
• Appraisal: The fee charged by an appraiser for evaluation of the property.
  
• Credit Report Fee: A fee charged by a credit-reporting agency.
  
• Tax Service Fee: A one-time fee for a service, which notifies the lender when the borrowers' taxes are delinquent.
  
• Flood Certificate Fee: A one-time fee for searching the records to determine the flood zoning and flood insurance requirement.
  
• Escrow Fee: The fee charged by the title/escrow company for their services as a disinterested third party during closing.
  
• Title Insurance Premium: A fee charged by the title company for a lender's policy and an owner's policy to protect from possible loss due to defects in title.
  
• Notary Fees: Fees charged by the title/escrow company for notarizing the legal documents at closing.
  
• Title Document Fee: Fees charged by the title/escrow company for researching public records, preparation of a preliminary and final title.
  
• Report and providing title insurance.
  
• Recording Fees: Fees charged by the title/escrow company for recording the Deed of Trust at the County Recorder's office.
  
• Express Mail & Courier Fees: Charges incurred by title companies for using express mail & courier services. All title and escrow documents use special delivery services for promptness and safety..

Q: What is the Truth in Lending Disclosure and why do borrowers receive it?
A: The Disclosure is designed to give information about the costs of their loan so they may compare these costs with those of other lenders.

Q: What is the ANNUAL PERCENTAGE RATE?
A: The annual percentage rate (APR) is the cost of your mortgage expressed as an annual rate. Because you may be paying points and other "Prepaid" finance charges at closing, the APR disclosed is often higher than the interest rate on your loan. This APR can be compared to the APR on other loan programs to give consumers a consistent means of comparing rates and programs.

Q: Why is the ANNUAL PERCENTAGE RATE different from the interest rate?
A: The APR is computed from the Amount Financed and is based on what the proposed payments will be on the actual loan amount credited to the Borrower at settlement. In a $150,000 loan with $3,000 Prepaid Settlement Charges, 30-year term and a fixed interest rate of 7.5%, the payments would be $1,049.08 (principal and interest only). Since the APR is based on the Amount Financed ($147,000) while the payment is based on the amount given ($150,000) the APR (7.710%) is higher than the Promissory Note.

Q: What is the FINANCE CHARGE?
A: The finance charge is the cost of credit expressed in dollars. It is the total amount of interest calculated at the interest rate over the life of the loan, plus Prepaid Finance Charges and the total amount of any required mortgage insurance charged over the life of the loan.

Q: What is the AMOUNT FINANCED?
A: The Amount Financed is the loan amount, minus the Prepaid Finance Charges. Prepaid Finance Charges include items paid at or before closing, such as loan origination fees, commitment fees ("points"), prepaid interest, and initial mortgage insurance premiums, if any. The Amount Financed is lower than the amount the Borrower applied for because it represents a NET figure. If you applied for $150,000 and the Prepaid Finance Charges total $3,000, the Amount Financed would be $147,000.

Q: Does this mean the Borrower will get a smaller loan than he or she applied for?
A: No. IF the loan is approved for the amount requested, the Borrower will receive credit toward their home purchase or refinance for the full amount for which they applied. In the example above, the Borrower would receive a $150,000 loan, not the $147,000 loan. Accordingly, whenever there are prepaid finance charges the Loan Amount is greater that the Amount Financed.

Q: What is the TOTAL OF PAYMENTS?
A: This figure represents the total amount the Borrower will have paid if they make the (minimum) required payments for the entire term of the loan. This includes principal interest, and mortgage insurance premiums, if any, but does not include payments for real estate taxes or property insurance. This figure is estimated on the Disclosure Statement and is estimated in any adjustable rate transaction.

Q: The TRUTH IN LENDING ACT (TILA) Disclosure says that if the Borrower pays off the loan early, he or she will not be entitled to a refund any part of the finance charge. What does this mean?
A: This means the Borrower will be charged interest for the period of time in which they used the borrowed money. A prepaid finance charge is generally not refundable, nor is any interest, which has already been paid. However, if the loan is paid off early the Borrower will not pay the full amount of the Finance Charge shown on the disclosure because they will only pay accrued interest through the date of the payoff.

Q: What is the filing Fee?
A: The Filing Fee is an estimate of the cost of recording the legal documents (mortgage, deed, assignments, power of attorney, etc.,) connected with the loan transaction. The filing fee is charged at closing and is disclosed as the amount that will be paid to the government agencies where the documents are recorded.