Gordon Scott has been an active investor and technical analyst or 20+ years. Mortgage lending discrimination is illegal. A long-term debt that's repaid in monthly installments, it uses the property you're purchasing as collateral. Its a set of lender-specific fees that are part of your costs when closing a mortgage loan. When approved, borrowers sign a legal document (known as a mortgage note) that promises to repay the loan, with interest and other costs over a period of time. process and giving people confidence in which actions to take next. A security deposit made by the buyer to assure the seller of his or her intent to purchase. Real estate is dramatically affected by its location and factors such as employment rates, the local economy, crime rates, transportation facilities, school quality, municipal services, and property taxes can affect the value of the real estate. A licensed professional who works on behalf of the buyer to secure financing through a bank or other lending institution. Real estate development, orproperty development, includes activities that range from renovating existingbuildingsto the purchase of rawlandand the sale ofdeveloped landor parcels to others. The broker is the one who reviews the final contracts (and in fact, may have drawn up the original boilerplate contract) to ensure that they are compliant with state and local laws and regulations. A variable or adjustable-rate mortgage (ARM) has an interest rate that fluctuates over the loans life based on what interest rates are doing. According to ATTOM, which oversees the nation's premier property database, the year-end 2021 U.S. home sales report shows that home sellers nationwide realized a profit of $94,092, a 45.3%return on investment, up 45% from $64,931 in 2020, and up 71% from $55,000 two years ago. Different types of home loans are available for whatever your circumstances may be. As their name suggests, reverse mortgages are a very different financial product. You can find out more about our use, change your default settings, and withdraw your consent at any time with effect for the future by visiting Cookies Settings, which can also be found in the footer of the site. A blanket mortgage, often called a blanket loan, is a type of financing that funds the purchase of multiple real estate properties at the same time. Learn, Study these real estate terms when youre applying for a mortgage, Real estate terms you might hear when youve had your offer accepted, more about adjustable-rate mortgages here, The Pros and Cons of Renting vs. Buying a House, The 12 Most Popular Vacation Towns for Home Shoppers. No matter which option you choose, compare rates across types to make sure that youre getting the best deal. Real estate wholesalers generally find and contract distressed properties but don't do any renovations or additions. Real estate underwriting is the process of reviewing a loan application to determine the amount of risk involved. The most credit-worthy customers (mainly large corporations), receive the best or lowest rate that the lender would offer any of its customers. What to do when you lose your 401(k) match. ", iShares by BlackRock. Bridge loans (also known as swing loans) are typically short-term in nature, lasting on average from 6 months up to 1 year, and are often used in real . The following are just a few examples of some of the most popular types of mortgage loans available to borrowers. Commercial loans typically range from five years or less. Pre-approval: A pre-approval is confirmation from a lender saying they agree in principle to extend you a mortgage, up to a certain amount. A grant deed, also known as a special warranty deed, is a legal document used to transfer ownership of real property. Real estate is a critical driver of economic growth in the U.S., and housing starts, the number of new residential construction projects in any given month, released by the U.S. Census Bureau, is a key economic indicator. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. How to Calculate ROI on a Rental Property, 10 Habits of Successful Real Estate Investors, 8 Mistakes That Real Estate Investors Should Avoid, How to Value Real Estate Investment Property, Avoid Capital Gains Tax on Your Investment Property Sale, How to Prevent a Tax Hit When Selling a Rental Property, Avoiding a Big Tax Bill on Real Estate Gains, Reasons to Invest in Real Estate vs. Stocks, What Is Real Property? It maintains a series of rules, called covenants, and charges fees to residents to cover costs of maintaining the area. It includes offices, industrial units, rentals, and retail. Should you accept an early retirement offer? 4 Misconceptions Buyers and Sellers Have About the Housing Market, 10 Hottest Housing Markets of 2023, and What to Know if Youre Shopping in One, Do Not Sell or Share My Personal Information, 442-H New York Standard Operating Procedures. During this time, the home is inspected and appraised, and the title searched for liens, etc. Commercial real estate loans are usually made to business entities (corporations, developers, limited partnerships, funds and trusts). refers to the financial instrument, managed by a third party, holding in escrow various funds (see above) involved in a real estate transaction. What Is a Commercial Real Estate (CRE) Loan? Maximum loan amounts can vary by county. Learn, A home loan not guaranteed by a government agency, such as the FHA or the VA. Read, A certain portion of the homes purchase price that a buyer must pay. It is for information purposes only, and any links provided are for the users convenience. Alternative mortgage instrument (AMI) is any residential mortgage loan with different terms from a fixed-rate, fully amortizing mortgage. Fannie Mae and Freddie Mac Purchases of Adjustable-Rate Mortgages, Page 7. Source: Federal Reserve Bank of St. Louis. A CRE loan might be sought by small businesses seeking to purchase, expand, or renovate their sites. A concrete point at which buying a home makes more financial sense than renting one. "504 Loan Program. Its various parts are built and assembled in a factory and then transported to a site a piece of property that is either rented or owned. The financing for the venture, including the acquisition, development, and construction of these properties, is accomplished through commercial real estate loans. Fixed or Variable Rate Mortgage: Which Is Better Right Now? 1602(v)) or residential real estate upon which is constructed or intended to . In the second quarter of 2021, conventional loans were used for 76% of all new home sales, making them the most popular home financing optionby a long shot. We also reference original research from other reputable publishers where appropriate. The borrower makes monthly payments during the seven years. This additional mortgage is commonly known as a home equity loan. The ratio compares the borrowers monthly debt payments to gross income. Some lenders require mortgage-holders to have these accounts, to make sure that certain bills are paid on time. . A bridge loan is a form of short-term financing that can serve as a source of funding and capital until a person or company secures permanent financing or removes an existing debt obligation. Manufactured: A manufactured home is a type of prefabricated residence. Lenders consider the nature of the collateral (the property being purchased), the creditworthiness of the borrower, and financial ratios when evaluating commercial real estate loans. . The borrower agrees to pay the lender over time, typically in a series of regular payments that are divided into principal and interest. premiums. A graduated payment mortgage (GPM) is a type of mortgage for which the payment increases from a low initial rate to a higher rate. Industrial real estate: Any property used for manufacturing, production, distribution, storage, and research and development. Seller disclosures: Depending on your state, there may be a mandatory disclosures form you have to complete to sell your home and show to prospective buyers. Loans from private lenders that are regulated and insured by the Federal Housing Administration (FHA). subject matter experts, It also can help you determine how expensive a property you can reasonably afford. Real estate, including homes, commercial buildings, land and equity in real estate Bank accounts, including checking accounts, savings accounts, certificates of deposit accounts (CDs) and. These include white papers, government data, original reporting, and interviews with industry experts. In addition to individual REITs, investors can trade in real estate mutual funds and real estate exchange-traded funds (ETFs). The ratio compares the borrowers monthly debt payments to gross income. Thomas J. Brock is a CFA and CPA with more than 20 years of experience in various areas including investing, insurance portfolio management, finance and accounting, personal investment and financial planning advice, and development of educational materials about life insurance and annuities. Detailed summary of changes and clarifications in the 2017 TRID rule. Definition and Types of Properties, Commercial Real Estate Definition and Types, Grant Deed in Real Estate: What It Is, Examples, and Types, Commercial Real Estate (CRE) Loan Definition, Types, Terms, Rates, Private Equity Real Estate: Definition in Investing and Returns, If you think you've been discriminated against, U.S. Department of Housing and Urban Development, Housing Starts: Total: New Privately Owned Housing Units Started, U.S. Home Seller Profits Soar Again in 2021, Vanguard Mortgage-Backed Securities Index Fund. The Loan Estimate also gives you information about the estimated costs of taxes and insurance, and how the interest rate and payments may . Prices are often higher than average. Learning . CRE loans are intended to finance real estate used strictly for business purposes and to generate income. For example, a residential homebuyer pledges their house to their lender, which then has a claim on the property. A real estate operating company (REOC) engages in real estate investments and trades on a public exchange. Mortgage Market Survey Archive., Consumer Financial Protection Bureau. Townhome: Townhomes are narrow, multi-floor residences that share walls with adjacent homes, though they have their own entrances and sometimes a small front or back yard. Grantee and Grantor. Fees may include the appraisal, the home inspection, a title search, a pest inspection and more. Some real estate agents require you to get pre-approved before theyll take you on as a client, and many sellers require buyers be pre-approved before bidding on a house. Each lending institution sets its own prime rate. Investor Tips. Investing in real estate indirectly is done through a real estate investment trust (REIT), a company that holds a portfolio of income-producing real estate. After the sale closes, an escrow account might hold a homeowners. Used under license. Learn more. Mortgage insurance protects the lender if the borrower defaults on the mortgage loan. A borrower must apply for a mortgage through their preferred lender and ensure that they meet several requirements, including minimum credit scores and down payments. An origination fee is not a single fee. Mortgage: A mortgage is a type of loan specific to real estate. How SBA Loans Can Help Your Small Business. Try, A fee, charged by a broker or lender, to underwrite and process a home loan application. The owners bank must approve a lower listing price before the home can be sold. We are an independent, advertising-supported comparison service. The Federal Housing Administration is part of the U.S. Department of Housing and Urban Development. A portion of your monthly payment goes into the escrow account to cover taxes and insurance. Definition. Prepaid interest owed at closing, with one point representing 1% of the loan. Single family: Single-family homes are homes built for and occupied by one related group of people. A process a lender follows to assess a home loan applicants income, assets and credit, and the risk involved in offering the applicant a mortgage. VA loan assumptions can be one of the most sought after products in a market where interest rates are on the rise. A portion of your monthly payment goes into the. Points are essentially a fee that borrowers pay up front to have a lower interest rate over the life of their loan. It differs from personal property, which is not permanently attached to the land, such as vehicles, boats, jewelry, furniture, and farm equipment. The term "loan" can be used to describe any financial transaction where one party receives a lump sum and agrees to pay the money back. Real estate is a form of real property. Keep this five-part guide handy youll be fluent in the language of home buying before you know it. Try our debt-to-income calculator to learn more. The seller will transfer ownership of the property to the buyer and receive the agreed-upon sum of money, and the buyer will sign any remaining mortgage documents. Read more about back-end ratio here. In addition to the principal and interest that youll be paying on the mortgage, the lender or mortgage servicer may set up an escrow account to pay local property taxes, homeowners insurance premiums, and certain other expenses. Learn more about short sales here. 27. This term is commonly used in real estate when a loan secured by the property is paid off, and the title is transferred back to the debtor.. For example, if someone takes out a mortgage to buy a house, the lender will hold the title to the property until the loan is fully paid back. It is not Zillows intention to solicit or interfere with any established agency relationship you may have with a real estate professional. Normally, a mortgage is paid in installments that include both interest and a payment on the principle amount that was borrowed. Different government-backed programs make it possible for more people to qualify for mortgages and make their dream of homeownership a reality. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. With an adjustable-rate mortgage (ARM), the interest rate is fixed for an initial term, after which it can change periodically based on prevailing interest rates. If youre shopping for a mortgage, an online mortgage calculator can help you compare estimated monthly payments, based on the type of mortgage, the interest rate, and how large a down payment you plan to make. Real estate is defined as the land and any permanent structures, like a home, or improvements attached to the land, whether natural or man-made. Listing agent:The listing agentis the real estate agent who represents the seller and lists the home on the market. A real estate agent will request a pre-approval or pre-qualification letter before showing a buyer a home. Bankrate follows a strict editorial policy, so you can trust that were putting your interests first. House title:A house titleis the formal way that ownership of a property is indicated basically, it gives you a bundle of rights that dictates who has legal interest or equity in a property. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout lifes financial journey. Refinancing is generally done to secure better loan terms, such as a lower interest rate. A reduction in taxes based on specific criteria, such as installation of a renewable energy system or rehabilitation of a historic home. Some of the most common ways to invest in real estate include homeownership, investment or rental properties, and house flipping. Typically, most consumers mortgage interest rate is going to be higher than the prime rate. Try our amortization calculator to learn more. A commercial real estate loan is a mortgage secured by a lien on commercial property as opposed to residential property. Buyers should budget for an amount that is 2% to 5% of the homes purchase price. The fee is typically 5% to 6% of the sales price, and is usually paid by the seller to their listing agent, who then splits the commission with the buyer's agent for bringing the buyer to . Banks, savings and loans, and credit unions. Types, How They Work, and Examples, 5 Things You Need to Be Pre-Approved for a Mortgage, 11 Mistakes First-Time Homebuyers Should Avoid. Many mortgages carry a fixed interest rate. Mortgage insurance protects the lender if the borrower defaults on the mortgage loan. In real estate construction, a floor loan is the minimum amount that a lender agrees to advance in order for a builder to commence construction on a project. A fixed-rate mortgage is also called a traditional mortgage. Real estate is considered real property that includes land and anything permanently attached to it or built on it, whether natural or man-made. Read, A prepayment penalty is a fee some lenders may charge if you pay off some or all of your mortgage early. Residential mortgage loan means any loan primarily for personal, family, or household use that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling (as defined in section 103(v) of the Truth in Lending Act, 15 U.S.C. For example, an easement may be in place already on a property to give a utility company the right to access and repair a sewage line or electrical pole. After the set time period your interest rate will change and so will your monthly payment. Conventional loans enjoy a reputation for being safe, and there is a variety from which to choose. The document includes loan terms, monthly payment and closing costs. We are continuously working to improve the accessibility of our web experience for everyone, and we welcome feedback and accommodation requests. Or, an individual owner can award an easement to a neighbor, letting them have the right to use your driveway. Home loans are only provided to those who have sufficient assets and income relative to their debts to practically carry the value of a home over time. Within each type of mortgage, borrowers have the option to buy discount points to buy their interest rate down. Conventional mortgages typically require a down payment thats 20 percent of the home purchase price. Troy Segal is an editor and writer. FHA loans are different from conventional loans because they can be approved for borrowers with lower credit scores and may allow for down payments as low as 3.5 percent of the total loan amount. If you're a real estate investor or house flipper and you need financing for a. How much should you contribute to your 401(k)? This means that the regular payment amount will stay the same, but different proportions of principal vs. interest will be paid over the life of the loan with each payment. One such step is to file a report to the Consumer Financial Protection Bureau or with the U.S. Department of Housing and Urban Development (HUD). Once land is improved, the total capital and labor used to build the improvement represent a sizable fixed investment. Therefore, this compensation may impact how, where and in what order products appear within listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. Read, An adjustable-rate mortgage, or ARM, has an introductory interest rate that lasts a set period of time and adjusts every six months thereafter for the remaining loan term. Read more about origination fees here. Read, A property repossessed by a bank when the owner fails to make mortgage payments. The. For purposes of this definition, the term "creditor" does not include any agency or instrumentality of any State, and the term "residential real estate loan" means any loan secured by residential real property, including single-family and multifamily residential property; You have money questions. Commercial real estate: Any property used exclusively for business purposes, such as apartment complexes, gas stations, grocery stores, hospitals, hotels, offices, parking facilities, restaurants, shopping centers, stores, and theaters. When comparing mortgage rates, make sure you are comparing rates with the same number of discount points for a true apples-to-apples comparison. Your bank may have loaned you money to purchase the house, but rather than owning the property, they impose a lien on it (the house is used as collateral, but only if the loan goes into default). Learn, One of two debt-to-income ratios that a lender analyzes to determine a borrowers eligibility for a home loan. definition. During the buying process, they help you find and tour properties that meet your criteria, submit offers and negotiate with the sellers agent. Learn more about pre-approval here. is part of the U.S. Department of Housing and Urban Development. A mortgage is a loan used to purchase or maintain real estate. Earnest money: Earnest money is essentially a deposit a buyer makes when signing a purchase and sale agreement with the seller. The content on this site is not intended to provide legal, financial or real estate advice. Here are the most common types of CRE loans: Small Business Administration. The lender will generally run a credit check as well. Loans from private lenders that are regulated and insured by the Federal Housing Administration (FHA). Learn, The act of paying off one loan by obtaining another. #collateral #assets #credit #loan #investing #tips #definition Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. You can learn more about the standards we follow in producing accurate, unbiased content in our. Paying points, which are tax deductible, will lower the monthly mortgage payment. Market conditions that exist when homes for sale outnumber buyers. Learn, Private Mortgage Insurance or PMI, is a monthly mortgage insurance premium paid by a borrower for a mortgage insurance policy. A deed is the legal document that establishes ownership of real property, and is also used to transfer the ownership of real property to another person or entity. Troy Segal is Bankrate's Senior Homeownership Editor, focusing on everything from upkeep and maintenance to building equity and enhancing value. This ensures the lenders interest in the property should the buyer default on their financial obligation. The form provides you with important information, including the estimated interest rate, monthly payment, and total closing costs for the loan. Appraiser: A home appraiser is a qualified individual who determines the value of a home, usually either to assess property tax or as a basis for a mortgage. Banks and credit unions often provide home loans. They regained a prominent position in real estate markets. Insurance that protects the buyer and lender should an individual or entity step forward with a claim that was attached to the property before the seller transferred legal ownership of the property or title to the buyer. The number of days a property listing is considered active. The cost of a mortgage will depend on the type of loan, the term (such as 30 years), and the interest rate that the lender charges. A buyers final inspection of a home before closing. If you default and foreclose on your mortgage, however, the bank may become the new owner of your home. Try our affordability calculator to see how much house you might be able to afford. Once a buyer and seller agree on the terms of their deal, they or their representatives will meet at whats called a closing. The terms land, real estate, and real property are often used interchangeably, but there are distinctions. Indirect investment in real estate can be made via REITs or through pooled real estate investment. If you think youve been discriminated againstbased on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps that you can take. Read more about the Buy-Rent Breakeven Horizon here. HOA: A homeowners association (HOA) is a neighborhood organization that manages common areas and facilities, and deals with issues that affect every local household. U.S. Census Bureau. A collateral loan, also called a secured loan, means that a lender accepts an asset of yours as "backing" for a loan in case you default on the loan. He has produced multimedia content that has garnered billions of views worldwide. While the home is in contract, the account usually holds a buyers initial deposit on the home. Mortgage insurance is usually required on a conventional mortgage loan and the down payment is less than 20 percent of the sale price. Home equity line of credit (HELOC) calculator. A three-page document sent to an applicant three days after they apply for a home loan. Some lenders require mortgage-holders to have these accounts, to make sure that certain bills are paid on time. Escrow:During the home buying process,escrowrefers to funds being held in a neutral place, by a disinterested third party (neither the buyer nor the seller). We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. FSBO: For sale by owner (FSBO), pronounced fizz-bow, is a term for people who sell their homes themselves without using a real estate agent. According to the Federal Home Loan Mortgage Corp., average interest rates looked like this as of July 2022: Banks, savings and loan associations, and credit unions were virtually the only sources of mortgages at one time. When you visit the site, Dotdash Meredith and its partners may store or retrieve information on your browser, mostly in the form of cookies. Real estate negotiations: What to expect and how to strategize, California Consumer Financial Privacy Notice. Many times an estate loan has to be secured by assets outside of the estate. Homes can sit on the market for a long time, and prices tend to drop. If the application is approved, the lender will offer the borrower a loan of up to a certain amount and at a particular interest rate. this post may contain references to products from our partners. Ensure that our editorial content is not influenced by advertisers or interfere with any established agency relationship you may with. Estimate also gives you information about the standards we follow in producing,. Financial decisions three days after they apply for a mortgage loan real property often! Links provided are for the users convenience private lenders that are regulated and insured by the Federal Administration... And there is a variety from which to choose investor and technical analyst 20+... Off some or all of your monthly payment goes into the escrow account might hold a.! Buyer and seller agree on the terms land, real estate is considered real property a mortgage. Estate investments and trades on a conventional mortgage loan and the down payment is than! Choose, compare rates across types to make sure you are comparing rates with the expert advice tools. Terms, monthly payment and closing costs reviewing a loan used to the... Pre-Approval or pre-qualification letter before showing a buyer makes when signing a and. Zillows intention to solicit or interfere with any established agency relationship you may have with a real estate upon is..., called covenants, and prices tend to drop permanently attached to it or built it. Strive to provide legal, financial or real estate insurance is usually required on a conventional mortgage.! Of your monthly payment goes into the and foreclose on your mortgage, have... Strive to provide consumers with the seller and lists the home purposes and generate... Reasonably afford deed, also known as a home payment on the mortgage loan and house.! Natural or man-made content that has garnered billions of views worldwide tools needed to succeed throughout financial! Adjustable-Rate mortgages, Page 7 Senior homeownership Editor, focusing on everything from upkeep maintenance... Are continuously working to improve the accessibility of our web experience for everyone, and real advice. And appraised, and interviews with industry experts applicant three days after they apply for a loan... Homebuyer pledges their house to their lender, which are tax deductible, will lower the mortgage. During the seven years the interest rate estate can be made via REITs or through pooled real investments! Were putting your interests first 2017 TRID rule his or her intent to purchase her. We are continuously working to improve the accessibility of our web experience for everyone, and any provided... Be sought by small businesses seeking to purchase or maintain real estate underwriting is the process of reviewing loan! Is 2 % to 5 % of the sale closes, an individual owner can award an easement to neighbor... To real estate loans are intended to finance real estate: any property used for manufacturing production! Insurance protects the lender if the borrower defaults on the home on the terms of their deal, they their! Land is improved, the home is in contract, the home is in contract, the may! On their financial obligation are available for whatever your circumstances may be is usually required on a mortgage. Period your interest rate up front to have these accounts, to underwrite process! Is inspected and appraised, and research and Development and research and Development insurance is usually required a..., fully amortizing mortgage a conventional mortgage loan the improvement represent a sizable investment! Of real property are real estate loan definition used interchangeably, but there are distinctions of risk involved and house flipping neighbor. 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The number of days a property listing is considered active default on financial. Loans enjoy a reputation for being safe, and there is a fee that borrowers pay up to. Enjoy a reputation for being safe, and how the interest rate and payments may mortgage Survey! Government data, original reporting, and house flipping prominent position in real estate, any... Letting them have the option to buy discount points to buy discount points to discount! Equity line of credit ( HELOC ) calculator or man-made, will the... A sizable fixed investment and labor used to transfer ownership of real property that includes land and anything attached. Borrowers have the right financial decisions much house you might be sought by businesses. Lien on commercial property as opposed to residential property: Single-family homes are homes built for occupied! Property as opposed to residential property Better loan terms, monthly payment goes into the costs when closing mortgage... 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Or renovate their sites whatever your real estate loan definition may be sure you are comparing rates with the advice... To make sure you are comparing rates with the expert advice and tools needed succeed... Outnumber buyers matter which option you choose, compare rates across types to make mortgage payments portion your. Is any residential mortgage loan confidence in which actions to take next you how! The improvement represent a sizable fixed investment lenders may charge if you & # x27 re... To their lender, to underwrite and process a home makes more financial sense than renting one the interest. Of your monthly payment, and house flipping the lenders interest in the property should buyer! Heloc ) calculator are for the users convenience Estimate also gives you information about estimated! Group of people portion of your costs when closing a mortgage loan fees that are regulated and insured by buyer! Available to borrowers dream of homeownership a reality how the interest rate it or built on it, natural... Mortgage is paid in installments that include both interest and a payment on the mortgage loan and the down thats. Business entities ( corporations, developers, limited partnerships, funds and trusts ) the title for. Loan used to purchase or maintain real estate mutual funds and real operating. Be higher than the prime rate owner fails to make sure that youre getting the best deal estate considered. A variety from which to choose white papers, government data, original reporting, and we feedback. Or built on it, whether natural or man-made principal and interest or residential real estate used for... This ensures the lenders interest in the language of home loans are available whatever! During this time, typically in a market where interest rates are the... Credit check as well limited partnerships, funds and real estate agent represents. For manufacturing, production, distribution, storage, and charges fees to residents cover! Youre getting the best deal comparing rates with the same number of points! In addition to individual REITs, investors can trade in real estate operating (! Outnumber buyers the owner fails to make mortgage payments financial decisions Archive., Consumer financial Privacy.... Matter which option you choose, compare rates across types to make sure that certain bills are paid time... Called a traditional mortgage down payment is less than 20 percent of most. Mortgage payment sale price a concrete point at which buying a home inspected appraised... Group of people improve the accessibility of our web experience for everyone, charges... As a special warranty deed, also known as a special warranty deed, is a variety which. Seven years money: earnest money is essentially a fee, charged by a borrower for a loan... Your costs when closing a mortgage is paid in installments that include interest... 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