Rates & Fees FAQ
While late fees are easy to understand, other charges that appear on your statement may not be so clear. Each loan is different, but most include potential fees for certain services or processing costs that the servicer incurs.
Visit our Common Fees and Costs page for general information on common, non-state-specific fees and costs that could be associated with a mortgage loan account.
The interest rate is the amount the lender charges you for borrowing money. The APR reflects the “true cost” of your loan over its entire term, and includes the total of the interest rate on your loan plus any other charges like prepaid interest, closing costs and mortgage insurance premiums.
Rates are determined by a combination of factors such as:
- How much money you put down at closing
- Your credit rating
- The value of the property
- The loan amount
- Discount points, if any
Actual loan costs may be different from estimated costs outlined in the Loan Estimate. This is because the final closing costs are determined by factors that can change (i.e., moving the closing date, which can change the estimated prepaid interest costs).
Prepaid interest is interest you pay from the day you close your loan to the first day of the next month. If you close on the 20th of a 30-day month, you’ll pay 10 days of prepaid interest before you make your first mortgage payment.
A rate lock is a promise by the lender to hold a certain interest rate for a specific time (usually 30, 60 or 90 days) based on the information you have provided. While a locked rate is not affected by the ups and downs of the interest rate market, a new agreement may be required if there are changes to the appraisal amount, loan-to-value ratio or other information verified during the loan process.
TRID is an acronym for TILA (Truth in Lending Act) RESPA (Real Estate Settlement Procedures Act) Integrated Disclosure. For most closed-end loans, two new forms replace the old Good Faith Estimate (GFE), Settlement Statement (HUD-1), and TILA Disclosure. The first form, the Loan Estimate, is designed to provide disclosures that will help you understand the key features, costs, and risks of the mortgage loan for which you are applying. We will provide you a Loan Estimate no later than three business days after you submit your loan application. The second form, the Closing Disclosure, is designed to provide disclosures that will help you understand all of the costs of the transaction. We will provide you a Closing Disclosure at least three business days before you close your loan.
For most borrowers, each monthly mortgage payment goes toward the following:
- Principal: the total outstanding balance of the loan
- Interest: the amount the lender charges you to borrow the money
- Taxes: are levied on the property by the local government
- Insurance: protects the owner and the lender from losses caused by fire and other destruction
Closing costs may vary and are determined by mortgage type and geographic location. These typically include lender fees and third party fees, such as for an appraisal and title insurance. Click here for a list of typical closing costs.
Generally, if your loan amount is more than 80% of the home’s appraised value, you will be required to have PMI. This protects the lender if you default on your loan.