Where does my money go?

A breakdown & glossary of fees associated with real estate transactions.

HUD # - Explanation

HUD sample blank form801 - Loan Origination Fee
A fee charged by your mortgage company or lender. The primary way that mortgage brokers and lenders are paid for their service.

802 - Loan Discount Points (aka "Points")
A one-time charge from the lender that you pay to buy down the interest rate on your loan. Typically, the higher the charge, the lower the interest rate (and vice versa). A positive value of points is charged to you and a negative value of points will be credited back to you. 1 point = 1% of the loan amount.

803 - Appraisal Fee
Covers the cost of the appraiser evaluating the property to estimate its fair market value so they the lender can calculate the loan amount as a percent of the property value (LTV or Loan-to-Value ratio). The LTV ratio is one of the factors Underwriters take into account to decide if they are willing to loan you the money. The amount of the Appraisal Fee depends on the location of the property, complexity of the appraisal, and the Appraiser's local competition.

804 - Credit Report
Usually $25-50 per report, this is the cost to the lender to obtain and review your credit history to help determine if they can approve your loan application. Credit reports are maintained my independent agencies that charge lenders for their reports. Many lenders check your credit reports from all three agencies, taking the median score for their purposes. One report is required per single borrower. Married borrowers can often use the same report and be charged only a single fee.

808 - Tax Service Fee
The costs of researching tax payments on the property to ensure that no tax lien exists. This is very important to lenders because a tax lien will take priority over a lender's lien. This fee also covers the cost of a tax agency hired to monitor your account to ensure that you are paying your property taxes. If you do not, the lender will be notified and will pay the taxes to ensure that they are the priority lien holder. This fee should be less than $150.

809 - Underwriting Fee
The fee associated with reviewing your loan application. This fee differs from lender to lender and is usually between $100 and $600. Underwriting is the analysis a lender performs to determine if they are willing to lend you money and is generally performed by a dedicated Underwriting Department.

810 - Administrative Fee
Often charged by lenders to cover some of their expenses; generally under $1000. This fee is sometimes rolled up into other fees instead of being charged separately.

812 - Commitment Fee
A fee paid by a potential borrower to a potential lender for the lender's promise to loan money at a specified date in he future. The lender may or may not expect this fee.

818 - Processing Fee
Does just want it says, covers the cost of processing the loan.

819 - Courier Fee
Some lenders specify the costs and charge for the cost of sending documents associated with your transaction. They are derived from the actual cost in fees and will be higher if rush service is needed, but should be under $100.

820 - Wire Transfer Fee
Closings often involve wire transfers to send the funds quickly and efficiently. If you use a title company or some other escrow company they are likely to prefer wire transfers since time is crucial. The account receiving the wire transfer, such as the title company, is charged a fee that is typically $50 or less.

821 - Document Preparation Fee
Covers the cost of drafting the loan documents and ranges from $50 - $500.

822 - Flood Certification
This fee is charged for the lender's research to determine the flood concerns for the property. The Federal Emergency Management Agency (FEMA) designates "flood zones" to indicate the risk of floods. Your property may be in a 50-year floor plane, a 100-year floor plane, or no flood plane at all. If your property is determined to be in a flood zone, you will be required to purchase flood insurance in addition to a regular insurance policy to ensure that you and the lender do not lose money if a flood was to occur on the property.

901 - Interest
The interest due at the time of closing should be the interest due on the new loan from the date of funding to the time of the first monthly payment (likely a partial month pro-rated). On average, 15 days of interest is due from the buyer at closing.
902 - Mortgage Insurance
Private mortgage insurance (PMI) is required by most lenders when your LTV (loan-to-value) ratio is greater than 80% (less than 20% down). This insurance protects the lender against a decrease in the value of the property. Lenders typically require that borrowers prepay two months of premium at closing.
903 - Hazard Insurance Premium
Lenders require that you insure the property that the are borrowing on to protect their investment from and unforeseen hazards. At closing, expect your lender to require that you pay a full year's premium up-front, around 0.35% of the property value. If you have an escrow account with your lender, you will pay this to your lender who will then pay your insurance company.
1001 - Hazard Insurance Impound
For loans with an escrow account, this is the amount your lender withholds to ensure you pay your hazard insurance on time, typically two months of premium. You will later pay 1/12, or one-month's premium with each monthly mortgage payment.
1002 - Mortgage Insurance Impound
Like hazard insurance impound, this is an estimated one month mortgage insurance premium (MIP). It's calculated using your actual premium rate and the remainder of premiums will be collected with your monthly mortgage payment for those with an escrow account with their lender.
1004 - Property Tax Impound
Property taxes vary greatly from one area to another and the amount due will vary from transaction to transaction. The seller is responsible for property taxes for the year up from when they purchased the property to the date of sale. The buyer is responsible for taxes beginning the date of closing. You will need to consult your agent for a specific estimate. The lender will require a percentage of the property taxes up-front if you are using an escrow account, and will then charge you one-month's taxes in each mortgage payment.

1101 - Settlement of Closing Fee
Charged for the services of the escrow/settlement agent that handles all of the financial transfers and payments associated with the transaction. This is how the title company's agent is paid.

1102 - Search Fee/Recordation Service Fee
For mortgages covers the cost of researching the deed for the property to determine of there are any other liens or encumbrances on the property and is often included in title insurance fees. These fees vary but should be under $500 for typical transactions. If you are getting a home equity loan, this fee covers the cost of processing the deed recordation to assure that the lien is recorded and that all borrowers are accounted for and are legally entitled to tap the equity of the property.
1103 - Title Examination Fee
Covers the costs of research of all liens against the property to ensure that your claim to the property is unencumbered.
1106 - Notary Fee
Covers the cost of hiring a licensed notary public to certify the identity of individuals signing the documents. Some title companies do not charge this fee and use in-house notaries.
1107 - Attorney Fee
Any fees associated with using an attorney to process the transaction. In Texas, Title Companies customarily handle detailed aspects of the transaction with an on-staff attorney.
1109 - Title Insurance: Lender's Coverage
Title Insurance insures against the possibility of an unknown lien or encumbrance on your property to ensure your undisputed ownership. Many of the fees associated with a transaction are research-related fees to ensure that the Title Company can provide Title Insurance. The Title Company checks for any unknown liens, unpaid claims, or any other restrictions to your ownership and protects the lender in case a lien does exist that the search did not uncover.
1110 - Title Insurance: Owner's Coverage
Like the coverage above, this coverage protects your ownership of the property against any unknown claims. A thorough search is performed and insures you for the entire value of the property. Premiums depend on property value and range fro 0.3% to 0.6%. In a refinance situation, this policy is not necessary.
1111 - Delivery/Courier Services
Similar to the fee charged by lenders for the transportation of documents but covers the title company's delivery costs. This fee is usually under $50.
1112 - Wiring
Once the loan in your transaction funds, the lender typically wires the money to the title company, escrow holder, or attorney who then disperses the funds. This nominal fee is usually $50 or less.
1113 - Environmental Endorsement Fee
Used to change the coverage of the title insurance policy to insure against the loss or damage sustained by reason of lack of priority of the lien over any environmental protection lien.
1114 - Title Endorsement Fee
Endorsements are used to change the coverage of the title insurance policy. For simple property transactions other forms of title insurance policies provide adequate coverage, but for less than simple transactions additional endorsements may be needed to tailor coverage to meet the needs of parties in the transactions.
1201 - Recording Fee
After closing, your mortgage and deed are recorded in the county clerk's recorder's office for public record. The fees vary by county but are relatively nominal.
1202 - County Tax Stamps
Stamps tax on the sale of real property, based on the sale of equity transferred.
1203 - State Mortgage Tax
Alabama, Florida, Georgia, Hawaii, Kansas, Maryland, Minnesota, New York, Oklahoma, Tennessee, and Virginia charge a tax on mortgages as an additional means of collecting tax revenue. Texas does not charge a state mortgage tax.
1204 - City Tax Stamps
Stamps tax on the sale of real property based on the sale price of equity transferred.
1205 - Intangible Taxes
An ad valorem tax on the current market value for people doing business in any state which levies this tax and applies to the calendar year in which it is paid.