Topic 14.7: Closing Disclosure

Learning Objectives

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.

Sample Closing Disclosure problem

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
• Survey—$425
• Prepaid interest from April 15 through April 30
• Documentary stamp tax on the note
• Intangible taxes on the mortgage

Seller’s expenses include
• Commission—7%
• Documentary stamp tax on the deed

Prorate the taxes

A. AmountB. Days in PeriodC. Daily Rate (A ¸ B)D. # of DaysE. Proration (C x D)

Calculate prepaid interest

A. Loan AmountB. Interest RateC. Annual Interest A x BC. Daily Rate (C /365 )# Days left in monthE. 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.    

Page 1 of the Closing Disclosure

Page 2 of the Closing Disclosure

Page 3 of the Closing Disclosure