CLOSING COST DEFINITIONS
Amortization Schedule – a schedule showing the principal and interest payments
throughout the life of the loan.
Appraised Value – the current value of a property based on factors such as area, location,
improvements, and amenities.
Appraisal Fee – cost for preparation by appraiser of an appraisal report/examination.
Credit Report – a detailed report of an individual’s credit history prepared by a credit
bureau and generally used by a lender to determine a loan applicant’s creditworthiness.
Document Preparation – a fee charged by an attorney for preparation of legal documents
for a transaction.
Escrow Fee – a fee charged by the title company to service the transaction, to escrow
moneys, and to cover the documents. The amount varies with each company, usually split
between buyer and seller.
Escrow/Impound Account – funds held by the lender for payment of taxes, insurance or
other periodic debts against real property. Usually does not include maintenance fees.
Homeowner’s Insurance – a form of property insurance designed to protect an individual’s
home against damages to the house itself, or to possessions in the home. Homeowners
insurance also provides liability coverage against accidents in the home or on the property.
Inspections – an examination of property for various reasons including, but not limited to,
termite inspections, inspection to see if required repairs were made before funds are
disbursed, etc.
Interest – rate charged for the use of loan funds. Most often paid in arrears.
Loan Application Fee – paid to the lender at time of application; check with lender for
amount.
Maintenance Fee – As applied to condominiums and planned developments, the amount
charged each unit owner to maintain the common area. Usually a monthly fee as part of the
budget.
Mortgagee’s Title Policy – insures the lender’s lien; does not protect the buyer.
Origination Fee – an up front fee charged by a lender for processing a new loan
application, used as compensation for putting the loan in place. Usually a percentage of
the amount loaned, for example, one percent.
Owner’s Title Policy – title insurance for the owner of property, rather than a lienholder.
Prepayment Penalty – a clause in a mortgage contract that states if the mortgage is
prepaid within a certain time period, a penalty will be assessed. The amount is usually
based on percentage of the remaining mortgage balance.
Realtor Fees – an amount paid to the real estate agent/brokerage firm as compensation for
his/her services.
Recording Fees – charged by the County Clerk to record documents in the public records.
Restrictions – certified copy of restrictions (in deeds of other recorded documents) required
by lender.
Survey – the measurements of the boundaries of a parcel of land, its area, and sometimes
its topography.
Tax Proration – to divide property taxes between buyer and seller proportionately to time of
use, or the date of closing.
Tax Certificates – certificates issued by tax service showing the current year’s taxes, the
last year the taxes were paid, and any delinquencies to be collected at closing.
