Terms in this set (150)
A real estate settlement is the closing of a transaction to transfer the title (deed) to property from a seller to a buyer
Prior to closing the buyer assures the title is marketable, through either title insurance or an attorney's opinion of title based on the abstract, or both.
Is given upon signing and meeting of the minds
Provided Upfront at the first substantive discussion
Is signed when we are hired to represent a principal/ client
Is given upon the signing or meeting of the minds. The sales contract should show the express agreements of the buyer and seller as to who will be responsible for certain items.
Abstract of title History
Title history- title search- legal description
Is normally provided at closing.
Accountability of Broker
Accountability of funds
Responsible for furnishing docs
Knowledge about accuracy
Follow up after closing
Real Estate Settlement Procedures Act
Administered by HUD
Federal disclosure law
Purpose of RESPA
Federal disclosure law administered by HUD regarding closing cost and fees in certain residential properties and requires full disclosure of estimated and actual settlement cost.
Applies only to new FDIC first mortgages on one-to-four family residential properties and requires full disclosure of estimated and actual settlement cost.
Requires the lender to furnish the borrower a good faith estimate with in three business days of loan applications a HUD booklet called "settlement cost and you" and a HUD form 1 must be used. Actual closing cost may be reviewed one day before closing.
Items Included in the Closing Statement
Protection for Lender
No kickbacks no fees to lender for preparing the HUD form 1
No fee may be paid to the Lender for preparing the uniform settlement statement (HUD Form 1)
Statement that shows a detailed accounting of all cash received and distributed
Purpose of Closing Statement
To show who pays for which expenses on the day of closing
Expenses on Closing Statement
These are items (charges or debits) that must be handled the day of the closing in order to transfer ownership of the property from the seller to the buyer. Most items are negotiable.
Areas differ in tradition
All items negotiable
Items paid the day of closing
Contract should dictate who pays for what
Buyer - debit cost
Expenses incurred in buying the property and acquiring a loan. These may include but are not limited to:
Reimbursement of prorated expenses prepaid by the seller
Seller - debit cost
These are expenses incurred in selling the property and satisfying the loans. These may include but are not limited to:
Wood infestation report (CL-100)
Charge for taxes, insurance or mortgage insurance that is paid on the closing date. Held in escrow by the lender in case of default. Sellers escrow may be transferred to buyer in an assumption.j
Prorated items (prorations)
Between buyer and seller.
1 party reimburses the other for expenses they owe for their period of ownership.
Based on when the bill is paid and date the sale is closed.
Seller is normally responsible for day of closing.
Taxes, utilities, insurance, HOA fees.
Protection for Lender
This includes MIP, PMI and funding fees. All of these charges are based on the loan amount, not the sales price, and are paid for by the buyer/borrower.
Mortgage Insurance Premium used on FHA loans.
Private Mortgage Insurance is used on conventional loans
Guarantees a VA loan
Possession / Transfer
Happens at closing
Guaranteed by a funding fee
No down pmt
Interest in arrears
Discount points are negotiable
Uses loan amt given in instructions
MIP added to loan or paid at closing
Interest paid in arrears by law
Discount points are negotiable
MIP escrow is a monthly fee that will be given as a percentage
millage rate given (1 mil= .001)
Deed Preparation & Stamps
Paid by the seller
$1.85 per $500(or any portion there of) of the sales price less assumed mortgages
Annual Tax liability
Assessed Value x Millage Rate given (1 mil= .001)
Remember to move the the decimal 3 places to the left.
The tax rates paid
Sales price x assessment rate = assessed value
Primary home Assessment Rate
Secondary Home Assessment Rate
Interest on a old loan
Accrues from the first of the month until and including the day of closing
Interest on a new loan
New loan has an interim period for interest that the buyer is responsible for, from and including the day of closing through the end of the month
Days in a year
What gives assurance of good title?
Name several things title insurance might cover?
Unrecorded liens, forgery, incompetent grantors
List the requirements of a valid deed
Offer and acceptance
Description of property
When does a deed have to be dated?
Do you have to record a deed?
What does recording a deed do and who sets the standards?
Gives constructive notice and done by SC state standards
ReSPA deals with
rESPA requires lenders to
Disclose all Loan cost (other than financing cost) to buyers and sellers
RESPA apples to mortgages from FDIC backed lenders involving a new first loan on what type of property?
One to four units (residential property)
RESPA requires statements to be prepared on a
When should the purchaser have access to the actual cost involved and when do they get a copy of the settlement statement?
Cost should be made available one day prior to closing and the statement should be given at closing.
Normal seller expenses to be paid at closing
Seller is normally responsible for selling cost charged to release the property and warranties such as old loan, accrued interest, and satisfaction, commission, C L 100, ac letter, reimbursing originations to buyer.
Normal buyer expenses to be paid at closing
Buying charges,loan charges, points, origination fee, transfer fees, recording fees, credit report, apprise sal, survey, title insurance, HO insurance and escrow items.
Normally 2 mos taxes, Ho insurance, mortgage insurance to be held in trust by the bank in case of default, by mortgagors and prorated items
Taxes, rent, water, sewer, garbage, insurance and interest
What's the purpose of the closing?
To finalize the transaction and transfer the deed.
What's the purpose of the closing statement?
To show who pays for what and what service shave been used as well as showing what the buyer brings to closing and what the seller gets at closing.
Items attorneys looking for in title search
Chain of title
Abstract of title
Certificate of title
Certificate of title
Attorney's opinion based on title exam
Abstract of title
Summary or history of title including conveyances
Chain of Title
Grantor- grantee index, previous owners
Credit to seller
Debit to buyer
Sales price x commission rate
Escrowed by broker
New conventional Mortgage
Sales price x LTV rate given
New VA Loan
Sales Price + funding fee
New FHA loan
FHA Loan Amount Given + MIP
PMI - private mortgage insurance
Loan x %Given
MIP- Mortgage Insurance premium
FHA Loan Amount Given x % given
Funding fee- VA loan
Sales Price x % given
Loan Amount x fee % given
Loan Amt x point % given
Interim Interest for buyers Loan
loan x interest rate \ 365 x 1st day of month through end of month.
Existing loan pay off and satisfaction
Accrued interest for sellers loan payoff
Payoff x interest rate / 365 x "1st day of month through closing. "
Loan Assumption Balance
Interest due on assumed loan prorated
Payoff x interest rate /365x 1st day of month through closing
Purchase Money Mortgage
prorated Taxes / unpaid seller
Sales price x assessment rate x millage = annual tax/ 365 x 1st day of the year through closing
Prorated Taxes Prepaid by seller
Annual tax/ 365 x days left in year after closing
Escrowed/ prepaid to bank
Annual tax or insurance /12 x number of months given
Mortgagee title insurance
Loan amount / 1000 and x rates given / binder (if one)
Deed stamps (documentary tax)
Sales price (less any mortgages assumed if any) rounded up to the nearest $500 / 500 x $1.85
Termite Letter (cl -100), HVAC , deed prep
Credit report, Appraisal, Survey, attorney fee, HO insurance , recording fee
Net to seller
Credits- debits ( expenses)
Due from buyer
Subtract credits from debits ( expenses)
Sales prices is a debit to the
Sales price is a credit to the
Earnest deposit is a credit to the
Earnest deposit is a debit to the
New Loan $'s are a debit to the
Discount points are a debit to the
New loan $'s are a credit to
Discount points are a credit to the
Origination Fee is a debit to the
Origination fee is a credit to the
Interim interest is a debit to the
Interim interest is a credit to the
Insurance is a debit to the
Insurance is a credit to the
Record deed is a debit to the
Record deed is a credit to the
Title Search is a debit to the
Title search is a credit to the
Prepaid HOA is a debit to the
Prepaid HOA is a credit to the
Commission is a debit to the
Commission is a credit to the
Deed prep is debit to the
Deed prep is credit to the
Deed stamps are debited to the
Deed stamps are credited to the
Old Loan Pay-off is a debit to the
Old loan pay-off is a credit to the
Accrued Interest is a debit to the
Accrued interest is a credit to the
Unpaid Real Estate Taxes are a credit to the
Unpaid Real Estate Taxes are a debit to the
Document tax is a charge to
Real Estate Settlement Procedures Act (RESPA)
An FHA loan on a four plex
Unless other wise specified in a contract, the possession rights of a property are transferred to the buyer on the date
The deed is delivered and accepted
A new home purchase with conventional financing requires the use of ________ at closing.
HUD Form 1
Real Estate Settlement Procedures act insures
Buyers and sellers have full knowledge of closing cost
Interest on an existing mortgage assumed is
Prorated on a closing statement
RESPA applies to
An application for a VA-guaranteed 1st mortgage
RESPA specifically prohibits
If you multiply to get there you can divide to get back
interest or income (what someone puts in their pocket in most cases)
Rate always stated as a percent.
value we happen to be working with, such as the value of the property being sold
Area of a square or rectangle
Length X width
Area of a triangle
Length X Width / 2
Straight line depreciation
Tax accounting Only used on investment property
What can not be depreciated for tax purposes
Interest Rate + points =
APR (annual interest rate)
Points count as
Part of first years APR
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