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