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, and
- intangible taxes on the mortgage.
Seller’s expenses include
- commission—7%, and
- 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) |
| $2,550.00 | 365 | 6.98630 | 105 | $733.56 |
Calculate prepaid interest
| A. Loan Amount | B. Interest Rate | C. Annual Interest A x B | D. Daily Rate (C /365 ) | E. # Days left in month | F. Prepaid interest due |
| $196,000.00 | 4% | $7,840.00 | 21.47945 | 16 | $733.56 |
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 |
Page 1 of the Closing Disclosure
Page 2 of the Closing Disclosure
Page 3 of the Closing Disclosure
