After successfully completing this topic, you will be able to
• explain the major sections of the Closing Disclosure, and
• demonstrate ability to read and check the Closing Disclosure for errors.
Harold Byer purchases a home from Sarah Sellar for $245,000. The closing date is April 15, with the day of closing charged to the buyer. Harold is financing the purchase with a new 4% loan for 80% of the purchase price.
He gives the broker a $7,000 earnest money check. The seller will pay off the existing first mortgage of $126,540.65. Annual property taxes of $2,550 is the only item to be prorated.
The lender requires the buyer to purchase and pay for (before closing) a hazard insurance policy.
Buyer’s expenses include
• Points—1% of the loan amount
• Origination fee—1% of the loan amount
• Appraisal—$450. The buyer paid this at the time of loan application.
• Title insurance—$1,250
• Credit report and other services—$406.00
• Recording fees—$78
• Prepaid interest from April 15 through April 30
• Documentary stamp tax on the note
• Intangible taxes on the mortgage
Seller’s expenses include
• Documentary stamp tax on the deed
Prorate the taxes
|A. Amount||B. Days in Period||C. Daily Rate (A ¸ B)||D. # of Days||E. Proration (C x D)|
Calculate prepaid interest
|A. Loan Amount||B. Interest Rate||C. Annual Interest A x B||C. Daily Rate (C /365 )||# Days left in month||E. Prepaid interest due|
Calculate documentary stamp taxes and intangible taxes
|Documentary stamp tax on deed $245,000 ÷ 100 = 2,450 2,450 x .70 = $1,715.00 |
Documentary stamp tax on note $196,000 ÷ 100 = 1,960 1,960 x .35 = $686.00
Intangible tax on mortgage $196,000 x .002 = $392.00 get $789.25.