Mortgage Points, sometimes referred to as “discount points”, are fees paid to the lender directly at closing in order to reduce the interest rate and the monthly payment. The act is also known as “buying down the rate”.
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Any time a potential borrower applies for a home loan in the U.S., the lender is legally obligated to send them a Loan Estimate within three business days of their application. A Loan Estimate can provide you with a variety of important information about the mortgage you’re interested in, including an estimate of the interest rate you’ll be charged, an estimate of your monthly payments, and an approximation of the closing costs you’ll face. And, within a minimum of three business days before a mortgage closes, a lender is legally obligated to give the borrower a Closing Disclosure form. This explains the actual, real terms of the mortgage.
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The actual definition of escrow, in law, is a bond, deed, or document held by a third party -- and this bond, deed, or document will take effect only when specific conditions have been met. During a home sale, escrow is the organization or use of a third party who ensures the buyer and seller meet specified requirements of the sale.
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First and foremost, it is imperative to remember that you ultimately choose your mortgage lender, which means, there are choices – and the lender has the primary impact on the charges tacked on to your closing costs. This fact is advantageous to the buyer and should be used as a tool to compare estimated closing costs that lenders detail in the Loan Estimate.
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Closing costs are the fees charged for services provided by your lender to assist in closing on a property. The fees are typically required to be paid upfront at closing; however, depending on your specific loan to value ratio, and the equity in your home or loan type, you may be able to roll the closing costs into the mortgage loan.
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Closing costs are the charges paid to purchase and settle on a property and are unrelated to reducing the principal loan amount. Usually, the amount paid for closing is between two and five percent of the price of the home, and typically the fees are listed on an estimate provided by the lender in response to your submitted application for the home loan.
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Closing is primarily for the buyer and seller to review and sign the documents that transfer the ownership of the home, and to record the way the buyer would like to take title of the home. The buyer will sign off on a promissory note confirming the agreed-upon amount owed for mortgage and other legal documents.
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