| How Can HUD-1 Help You Generate Business? | | | | monthly payment.902 Mortgage insurance |
| -----------------------------------------HUD-1 is a | | | | premiums due at settlement. Escrow reserves for |
| standard form you use very often. The form | | | | mortgage insurance are recorded later. If your |
| serves not just as a settlement closing | | | | mortgage insurance is a lump sum payment good |
| statement, but also as a proof of payment of | | | | for the life of the loan it should be noted.903 |
| different tax deductions. Understanding the form | | | | Hazard insurance premiums due at settlement. It |
| and the tax deductible items and communicating | | | | is not used for insurance reserves that will go into |
| them to your clients will help your clients to | | | | escrow.904 Miscellaneous items: flood insurance, |
| minimize their taxes and help you to build trust | | | | mortgage life insurance, credit life insurance and |
| and get more business exposure.What is the | | | | disability insurance premiums.905 Miscellaneous |
| HUD-1 | | | | items: flood insurance, mortgage life insurance, |
| -----------------HUD-1 is a form used by the | | | | credit life insurance and disability insurance |
| settlement agent (closing agent) to itemize all | | | | premiums.Section 1000 Reserves Deposited with |
| incoming funds and all charges paid and accrued | | | | Lender1001-1007 Funds used to start the |
| by a borrower and seller for a real estate | | | | borrower's escrow account, from which the |
| transaction. | | | | lender will pay next year's premiums. Each |
| When is the HUD-1 Issued?The Real Estate | | | | mortgage payment includes an amount that |
| Settlement Procedures Act (RESPA) requires that | | | | covers a portion of these recurring expenses.1008 |
| the form be issued in all real estate transactions in | | | | Escrow adjustment calculated by the settlement |
| the United States which involve federally related | | | | agent by comparing different escrow formulas to |
| mortgage loans. RESPA states you should be | | | | assure the lender does not collect more escrow |
| given a copy of the HUD-1 at least one day prior | | | | funds than allowed.Section 1100, Title Charges1101 |
| to settlement.When Do Clients Need HUD-1 For | | | | Settlement agent's fee. |
| Taxes? | | | | The fees for the abstract or title search and |
| -------------------------------------Clients use the | | | | examination are entered in lines1102 Abstract / |
| information included in the form when they file | | | | title search fee1103 Examination fee1104 Title |
| their annual taxes. The filing deadline is normally | | | | insurance binder (also called a commitment to |
| April 15 of every year for the proceeding year. | | | | insure). Payment for title insurance policies is |
| To allow the client enough time to file taxes using | | | | entered later.1105 Deed preparations record |
| the HUD-1 information, it is recommended that a | | | | charges and work on mortgages and notes1106 |
| copy of the HUD-1 will be sent to the client in | | | | The fee charged by a notary public for |
| January.Because the real estate transaction takes | | | | authenticating the execution of the settlement |
| place during the year, usually long before filing the | | | | documents1107 Attorney's fees.1108 Title |
| tax return, the HUD-1 given to the client at closing | | | | insurance (except the cost of the binder).1109 |
| time could be lost or misplace. Sending the client a | | | | Informational lines disclosing costs for the |
| copy of the HUD-1 with a cover letter will be | | | | separate title insurance policies (Only line 1108 is |
| very helpful and time savings to the client.HUD-1 | | | | carried forward.)1110 Informational lines disclosing |
| Client Sample Letter | | | | costs for the separate title insurance policies (Only |
| --------------------------The following is a sample | | | | line 1108 is carried forward.)1111-1113 Other |
| letter you can use to send your clients:[Date]TAX | | | | title-related charges which vary by location: tax |
| TIME IS COMINGDear [Client's Name]:Tax time | | | | certificate fee / private tax feeSection 1200, |
| indeed is just around the corner, and the first | | | | Government Recording and Transfer Charges1201 |
| thing you will need is a copy of the Closing | | | | Recording fee1202 City or County recording |
| Statement on your property. Moving can be a | | | | fee1203 State recording fee1204-1205 |
| very busy time, and you may have misplaced this | | | | Miscellaneous recording fee itemsSection 1300, |
| very important document.I would like to be sure | | | | Survey and inspections fees (for pests, |
| you avail yourself of all the tax advantages | | | | lead-based paint, radon, structural inspections, |
| possible from our transaction. If your accountant | | | | inspections for heating, plumbing, or electrical |
| has any questions, please have him or her call me | | | | equipment) and home warranty.Line 1400 Total |
| (if you need a referral to an accounting you can | | | | settlement charges paid from borrower's and |
| trust, I'd be happy to provide you with one).I look | | | | seller's funds. They are also entered in Sections J |
| forward to continuing as your realtor and | | | | and K, |
| providing you the highest level of service | | | | lines 103 and 502.Section J, Summary of |
| possible.Yours sincerely,[your name]Oh, by the | | | | Borrower's TransactionSection 100, Gross |
| way... If any of your friends or relatives are | | | | Amount Due from BorrowerLine 101 Gross sales |
| thinking about buying or selling a home, I'd love to | | | | price of the property.Line 102 Personal property |
| be of service to them. So, when you think of | | | | charges (draperies, washer, dryer, outdoor |
| these people, just give me a call with their name | | | | furniture, and decorative items purchased from |
| and number. I'll be happy to follow up and tend to | | | | the seller)Line 103 Total settlement charges to |
| their Real Estate needs.Which HUD-1 Information | | | | borrower (from Line 1400 section L)Lines 104-105 |
| Is Important For Your Client's Taxes?The | | | | Amounts owed by the borrower or previously |
| information reported in the HUD-1 relates to the | | | | paid by the seller (include balance in the seller's |
| following tax statements and schedules:Tax form | | | | escrow account if the borrower is assuming the |
| HUD-1 lineSchedule A (itemized deductions), Line | | | | loan and uncollected rents borrower may owe the |
| 10 - Annual mortgage interest deduction Line | | | | seller)Lines 106-112 Item paid in advance by seller |
| 901Schedule A (itemized deductions), Line 10 - | | | | (Prorated portion of city/county taxes)Line 120 |
| Points deduction Line 802Schedule A (itemized | | | | Gross amount due from borrower. Total of Lines |
| deductions), Line 6 - Real estate taxes deduction | | | | 101 through 112Section 200, Amounts Paid By or |
| Line 1003, 1004Schedule E (rental income), Line 20 | | | | In Behalf of BorrowerLine 201 Buyer's credit for |
| - Depreciation (cost of property is required) Line | | | | the earnest money paid when the offer was |
| 101, 102Schedule E (rental income), Line 12a - | | | | accepted.Line 202 The new loan paid to the |
| Mortgage Interest Deduction Line 901, | | | | borrower by the lender.Line 203 Loan borrower |
| 802Schedule E (rental income), Line 9 - Insurance | | | | assumes or takes title subject to an existing loan |
| 903, 1001, 1002Schedule E (rental income), Line | | | | or lien on the property.Lines 204-209 Miscellaneous |
| 16a - Real state taxes 1003, 1004Schedule E | | | | items paid by or on behalf of the buyer |
| (rental income), Line 18 - Other deductions 703, | | | | (allowance the seller is making for repairs or |
| 801-811, 1005, 1101-1110, 1201-3, | | | | replacement of items or a note seller accepts |
| 1301-1302Schedule D (capital gain) Part I, II, | | | | from borrower for part of the purchase |
| Column d - Sales Price 401, 402Schedule D (capital | | | | price)Lines 210-219 Bills seller has not yet paid, but |
| gain) - Part I, II, Column e - Cost or other basis | | | | owes (taxes, assessments or rent collected in |
| 101, 102Form 6252 (installment sale), Line 8 - | | | | advance by the seller for a period extending |
| Selling price 401, 402Form 6252 (installment sale), | | | | beyond the settlement date)Lines 220 Total for all |
| Line 8 - Cost or other basis 101, 102Form 4797 | | | | items in Section 200. The total is added to the |
| (sale of business property), Part I, Column d - | | | | borrower's proceeds. |
| Cost or other basis 401, 402Form 4797 (sale of | | | | Section 300, Cash at Settlement From/To |
| business property), Part I, Column f - 101, | | | | BorrowerLines 301 Summary of the total amount |
| 102HUD-1's two sections | | | | due from the borrower.Lines 302 Summery of all |
| --------------------Section J, Summary of | | | | items already paid by or for the borrower.Lines |
| Borrower's TransactionThis section contains 6 | | | | 303 The difference between lines 301 and 302 |
| sections, and basically summarizes the entries | | | | representing the amount of money the borrower |
| made to the section L (Settlement charges, see | | | | owes at closing. If negative number the borrower |
| below).- Section 100, Gross Amount Due from | | | | will receive funds back at closing.Section K, |
| Borrower- Section 200, Amounts Paid By or In | | | | Summary of Seller's TransactionSection 400, |
| Behalf of Borrower- Section 300, Cash at | | | | Gross Amount Due to Seller (amounts added to |
| Settlement From/To Borrower- Section 400, | | | | the seller's funds)Line 401 Gross sales price of the |
| Gross Amount Due to Seller- Section 500, | | | | property.Lines 404-405 Amounts owed by the |
| Reductions in Amount Due to Seller- Section 600, | | | | borrower or previously paid by the seller (escrow |
| Cash at Settlement To/From SellerSection L, | | | | account's balance or uncollected rents)Lines |
| Settlement ChargesThat's where many entries | | | | 406-412 Items paid in advance by the seller |
| are tabulated before being brought forward to | | | | (prorated portion of city / county taxes)line 420 |
| page 1. Columns contain charges that are paid | | | | is the gross amount due to the seller. Total of |
| from either the borrower's or the seller's funds. | | | | Lines 401 through 412.Section 500, Reductions in |
| Your closing statement probably won't have | | | | Amount Due to Seller (amounts are subtracted |
| entries in all lines.- Section 700, Agency | | | | from the seller's funds)line 501 When a third party |
| Commissions- Section 800, Items Payable in | | | | holds the borrower's earnest money deposit, and |
| Connection with Loan- Section 900, Items | | | | will pay it directly to the seller.line 502 Total from |
| Required by Lender to be Paid in Advance- | | | | line 1400, the seller's total charges as computed in |
| Section 1000, Reserves Deposited with Lender- | | | | Section L.line 503 When borrower assumes or |
| Section 1100, Title Charges- Section 1200, | | | | takes title subject to existing liens which are |
| Government Recording and Transfer Charges- | | | | deducted from the sales price.line 504-505 First |
| Sections 1300 & 1400, Additional Settlement | | | | and/or second loans which will be paid-off as part |
| Charges and TotalsLine By Line DescriptionSection | | | | of settlement (including accrued interest).line |
| 700, Agency Commissions701 Commissions paid | | | | 506-509 Miscellaneous entriesline 506 Deposits paid |
| to real estate agencies702 Commissions paid to | | | | by the borrower to the seller or third party other |
| real estate agencies | | | | than the settlement agentline 510-519 Bills unpaid |
| Section 800, Items Payable in Connection with | | | | by seller (taxes, assessments or rent collected in |
| Loan801 Processing or originating loan fees. If the | | | | advance )line 520 Total of all items in Section 500. |
| fee is a percentage of the loan amount, the | | | | The total is deducted from the seller's |
| percentage will be stated.802 "Points" charged by | | | | proceeds.Section 600, Cash at Settlement To |
| the lender. Each point is 1% of the loan | | | | From Sellerline line 601 Gross amount due to the |
| amount.803 Appraisal fees. If paid with loan | | | | seller, from line 420.line 602 Total reductions in |
| application before closing, it should be marked | | | | seller's proceeds, from line 520.line 603 Difference |
| "POC," (paid outside of closing). The amount would | | | | between lines 601 and 602. Cash amount paid to |
| be shown, but would not be included in the total | | | | seller (if a negative number the seller owes |
| fees you bring to settlement.804 Cost of the | | | | money at closing)Tax USA Inc. |
| credit report if it is not included in the Origination | | | | ------------Tax USA, Inc. is a complete tax, |
| Fee.805 Inspections fee, done at the request of | | | | accounting and financial management firm |
| the lender.806 Private Mortgage Insurance (PMI) | | | | specializes in small businesses, corporations and |
| application fee.807 Assumption fee, when buyer | | | | high income individuals. Tax USA Inc.'s mission is to |
| takes over seller's existing mortgage.808 | | | | exceed clients' expectation by providing superb |
| Miscellaneous items connected with the loan, such | | | | tax, accounting & financial Management services. |
| as fees paid to a mortgage broker.809 | | | | We offer our clients tax, accounting and |
| Miscellaneous items connected with the loan, such | | | | bookkeeping services, CFO Outsourcing, Budget |
| as fees paid to a mortgage broker.810 | | | | Review and Business Plans, Cash Flow |
| Miscellaneous items connected with the loan, such | | | | Management, Payroll Services and Entities' |
| as fees paid to a mortgage broker.811 | | | | Incorporation.Our ClientsWe focus on small and |
| Miscellaneous items connected with the loan, such | | | | mid size businesses, non-profit organization and |
| as fees paid to a mortgage broker.Section 900, | | | | high income individuals. Client list comprised of |
| Items Required by Lender to be Paid in | | | | corporations, non-profit organizations and high-tech |
| Advance901 Interest collected at settlement for | | | | employees. |
| the time period between closing and the first | | | | |