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Mortgage Electronic Recording System fee that allows the lender to record the deed and title with the county where the property is located. Most lenders have a fee or fees similar to this. They may also be referred to as recording fees.
Private Mortgage Insurance (PMI) insures the lender against a portion of the losses realized when a borrower defaults on a mortgage loan. If your down payment is less than 20% of the total amount of the home's purchase price or appraised value, whichever is applicable the lender will typically require PMI to mitigate risk associated with this higher loan-to-value. PMI may be tax-deductible. (Please consult your tax advisor for more information.)
The process of finding out how much money you appear eligible to borrow. A lender will need your application and credit information to determine your preapproval status. All information is subject to verification during the loan process. You may receive a pre-approval letter that states the loan amount for which you were pre-approved. This can be a valuable tool when house hunting.
Pre-Paid Interest Accrued
The loan interest between the first day of the month until the day you close that month. Also known as pre-paid interest, it is a line item on your Good Faith Estimate.
Prequalification is the process of estimating how much money you can borrow based on your unverified income and asset information. Mortgage prequalification may help you estimate what you can potentially afford.
The Principal Balance is the amount of money borrowed at closing, or the remaining balance at any point during repayment. A portion of a fully-amortizing monthly mortgage payment is applied toward the principal balance to reduce the balance over the loan term. Typically, over time, more of your monthly payment is paid to the principal.
Annual state and local taxes that a property owner pays to the government. Real estate property taxes on mortgaged property are typically paid monthly with the mortgage payment. That portion of your payment is set aside into an escrow account. The lender then pays the annual taxes when they are due out of the escrow account.
The percentage of the loan you may agree to pay the lender in order to obtain a particular interest rate. One point typically costs 1% of the total loan amount. If you agree to pay a point, your interest rate may be reduced up to 1/8th of a percentage point or more from the interest rate quoted with no points (also known as the "par" rate).
Adapted from the U.S. Department of Housing and Urban Development.