Frequently Asked Questions
Many homebuyers interested in getting a mortgage often encounter questions and concepts during the
mortgage process that they may not fully understand. This Q&A section is created to answer some of the
most common questions and concepts that you will likely see when learning about mortgages.
a. Lender fees
b. Origination fee
c. Discount points
d. Third party service fees for appraisal, credit report, flood certification, etc.
e. Title and escrow / attorney charges
f. Transfer / intangible / mortgage tax as required by the city, state, etc.
g. Per diem interest
The lender is required by law to provide to you a preliminary estimate after you submit your application.
1. Private Mortgage Insurance (PMI): PMI is applicable for conventional loans. It is an insurance coverage that your lender will require you to purchase if your down payment is less than 20% of the loan amount. The purpose of this insurance is to protect the lender’s investment on the loan. This is generally paid from your escrow account each month and is collected together with your monthly mortgage payment.
2. FHA Mortgage Insurance: This mortgage insurance serves the same purpose as a PMI, but has a different name because it is charged by your lender for taking out FHA insured loans. You will be required to pay a portion as an upfront premium during closing, plus a monthly amount.
3. Hazard Insurance: It is homeowner’s insurance required by the lender to protect their investment against damage to the property, before the loan is paid in full. Note that a separate Flood Insurance may be required in certain areas, in addition to Hazard Insurance.
4. Title Insurance: Just as the name suggests, Title Insurance is indemnity insurance purchased to protect the property title. The title insurance protects against title defects and any possible lawsuits against it due to documentation deficiencies or lien claims. It is important because it protects both the lender’s and borrower’s interests.