Terms Used by Lending Institutions
Below are some terms used by Mortgage Lenders. Understanding what they mean will help you better understand your Rights and Obligations in discussing them and getting answers to your questions:
Usury limit: The Maximum Interest Rate an Unlicensed Mortgage Lender can charge, which can vary from state to state. This Rate Limit may also depend upon the Type of Loan offered.
Up-front costs or closing costs: These Mortgage Terms relate to the original costs of the loan, including the: Appraisal Fee, Attorney's Fees, Title Search Fees, Mortgage-Recording Fee, Mortgage Tax, and Title Insurance.
You will want to understand exactly how much these fees will amount to before you sign the contract. The Mortgage Lender is not required to factor in the costs for you.
Appraisal fee: The cost charged to appraise your home or judge its market value.
Mortgage insurance: Insurance against your defaulting on the loan and which may be required by the Lender. Some Lenders offer it themselves; in other cases you may have to purchase it elsewhere.
Broker's fee: The fee you pay to whoever arranges your financing. (You should get this amount in writing in advance).
Title search fee: The Fee Paid to the Lender to look up the title to the house and make sure there are no liens against the property.
Points: A "point" is equal to one percent of the loan amount. Each point adds between about one-eighth and one-fourth of one percent to the interest rate you pay. Comparison-shopping of points, as well as the Interest Rate, is advisable. An institution that offers no points may Charge a Higher Interest Rate, and vice versa. Your decision may be based upon how much you want to pay up front, since points are included in the up-front fees. Less money paid up front may mean slightly higher monthly payments.
On the other hand, a Mortgage Lender may offer to finance the points, rather than require that they be paid up front. In this case, there will be Finance Charges on the points that will Increase Your Monthly Payment.
Insecurity clause: This clause gives the Mortgage Lender the right to change the terms of the loan. The bank simply informs you what the changes will be. You can refuse to go along with them, but you would have to pay off your entire loan first.
