Understanding the Loan Cost Terms on the Loan Estimate Form

This video explains the Loan Costs section of the mortgage Loan Estimate form.  Key terms for which figures are provided include:

  • Closing Costs: the set of fees involved in transferring title of the property to the buyer.
  • Origination Charges: fees the lender collects for the mortgage process.  These may include fees for handling the application itself, as well as “Origination Fees” — paid by the lender to a party that originates your loan, such as a mortgage broker.
  • Points:  essentially, a form of prepaid interest. Points are paid at time of the loan to lower the interest rate of the loan. Points may be tax deductible.
  • Underwriting:  fees charged by the lender to evaluate loan risks, based on the transaction and the borrower’s financial attributes.

The Loan Costs section is usually found on Page 2 of the Loan Estimate.

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