Chapter 30
1099-S Reporting
"a report to be submitted on IRS Form 1099-S by escrow agents to report the sale of real estate, giving the seller's name, Social Security number, and the gross sale proceeds."
example of MIP calculation
$245,000 FHA-insured loan, how much is paid in monthly MIP if the up-front fee is rolled into the loan amount? To determine this, we must first calculate the loan amount with the up-front assessment added in. This equals $245,000 multiplied by 0.0175, which gives us $4,287.50. Then, we add $245,000 to get a new loan balance of $249,287.50. Next, we calculate the annual MIP by multiplying $249,287.50 by 0.0085, which equals $2,118.94. Lastly, we divide $2,118.94 by 12 months to get a monthly MIP fee of $176.58.
To calculate the amount of interest paid per diem, we must use the following formula:
(Loan Amount x Interest Rate) / 360 days. important to note here that lenders use a 360-day calendar, rather than a 365-day calendar.
banking days for Fha vs lender
365 vs 360
how many pages is the closing disclosure?
5
credit
A bookkeeping entry on the right side of an account, recording the reduction or elimination of an asset or an expense, or the creation of or addition to a liability or item of equity or revenue.
Warranty Deed
A deed in which the grantor makes formal assurance as to quality of title.
RESPA
A federal law requiring the disclosure to borrowers of settlement (closing) procedures and costs by means of a pamphlet and forms prescribed by the United States Department of Housing and Urban Development.
Closing Disclosure
A final closing disclosure to the consumer that must be received by the consumer 3 days before closing identifies every expense in the deal and shows who paid what. Because the CD describes the entire deal, it may be the most useful document on the closing table. Parties review the Closing Disclosure for details, long after they stop looking at the deed or mortgage.
chain of title
A history of conveyances and encumbrances affecting the title from the time the original patent was granted, or as far back as records are available, used to determine how title came to be vested in current owner.
Purchase Money Mortgage
A mortgage given by the seller to the buyer to cover all or part of the sale price. Seller financing.
total monthly loan payment
A property is being purchased for $400,000. The buyer will obtain a 30-year conventional loan of $360,000 with an interest rate of 4.5%. The lender is assigning a PMI risk factor of 0.62%. The loan factor equals 5.06. The annual property taxes amount to $7,200, while the annual insurance premium is $1,400. The first step is to determine the monthly principal and interest. As we discussed earlier, you determine this by taking the loan amount and dividing it by $1,000, and then multiplying by the loan factor.This equals $360,000 divided by $1,000, which is $360. $360 times the loan factor of 5.06 gives us a monthly principal and interest payment of $1,821.60. The second step is to determine the amount paid in taxes each month. This simply equals $7,200 divided by 12 months, or $600. The third step is to determine the amount paid in insurance each month. This equals $1,400 divided by 12 months, or $116.67. The fourth step is to determine the amount paid in PMI each month. As we discussed a moment ago, we first need to multiply the loan amount by the PMI risk factor to get the annual amount paid in PMI. This equals $360,000 times 0.0062, or $2,232. Then, we divide the annual PMI by 12 months to get a monthly PMI payment of $186. The last step is to add up the PITI and the PMI payment to determine the total monthly payment.The P&I equals $1,821.60. The monthly taxes equal $600, the monthly insurance equals $116.67 and the PMI payment is $186. When you combine these four numbers, you get a total monthly loan payment of $2,724.27.
abstract of title
A summary or digest of all transfers, conveyances, legal proceedings, and any other facts relied on as evidence of title, showing continuity of ownership, together with any other elements of record which may impair title.
Opinion of title
An attorney's written evaluation of the condition of the title to a parcel of land after examination of the abstract of title. based on their title search
proration
Dividing property taxes, hazard insurance and other expenses or income between the buyer and seller, as of date of settlement.
Formula for prorating taxes
First, we must calculate the amount of taxes paid per diem.To find this, you must take the annual tax bill and divide it by 365 days.This equals $3,200 divided by 365, or $8.7671 per diem.Next, we calculate the number of days starting with January 1st and ending at the closing date of April 20th.January has 31 days, February has 28 days, March has 31 days, and April has 20 days until the closing date. That's a total of 110 days.Finally, we multiply the number of days between January 1st and the closing date by the per diem amount. This equals 110 days multiplied by $8.7671, or $964.38.
Intangible tax
In Georgia, the intangible tax is equal to the NEW loan amount divided by $500, and then multiplied by $1.50. In other words, $1.50 per every $500 of the loan amount. For example, if a buyer obtains a $420,000 mortgage to purchase a $525,000 house, how much is paid for the intangible tax? To find this, we must first divide the loan amount by $500. Remember, the intangible tax is based on the loan amount, not the purchase price. $420,000 divided by $500 equals $840.Next, we multiply $840 by $1.50 to get an intangible tax of $1,260.
Transfer Tax Calculation
In Georgia, the transfer tax is set at $0.10 per $100 of the taxable sales price.For example, if a property sells for $350,000, the transfer tax will equal $350,000 divided by 100, which equals $3,500, and then multiplied by $0.10, which gives us $350 in transfer taxes.
calculating monthly loan payment
In order to determine the principal and interest on a fully amortized loan, you must have two numbers; the loan principal (the amount borrowed) and the factor (the dollar amount charged by lenders, depending on the interest rate, for each $1,000 borrowed).
Title insurance
Insurance to protect a real property owner or lender up to a specified amount against certain types of loss, e.g., defective or unmarketable title.
loan estimate
Loan Estimate, or LE. This three-page form is highly structured, and every Loan Estimate has the same sections, laid out in the same order, providing the same kind of information. The lender's best good faith estimate of all the terms and costs associated both with the loan and with the closing.
MIP
MIP requires an upfront fee, which may be rolled into the loan amount, plus a monthly insurance premium. The up-front premium is calculated as 1.75% of the loan amount, and the monthly assessment is currently 0.85% of the loan amount, as per FHA guidelines.
PITI
Principal, Interest, Taxes, Insurance
Closing
Process by which all the parties to a real estate transaction conclude the details of a sale or mortgage. The process includes the signing and transfer of documents and distribution of funds.
prorating insurance
Prorating insurance is different from property taxes in that insurance premiums renew on the date the policy was issued, which is usually the closing date for the existing owner. homeowner purchased their insurance policy on February 15th, the policy will end the following year on February 14th.
affiliate arrangement
RESPA allows lenders to refer consumers to affiliated settlement service providers, but only if the lender gives the buyer a disclosure called an Affiliated Business Arrangement Disclosure.
CFPB (Consumer Financial Protection Bureau)
Regulatory agency charged with overseeing financial products and services offered to consumers. they created the closing disclosure with the amendment to RESPA in 2010. Started requiring lenders to use it in OCT. 2015
marketable title
Title which a reasonable purchaser, informed as to the facts and their legal importance and acting with reasonable care, would be willing and ought to accept.
prorating rental income
We'll assume the closing date is October 18th and the monthly rental income is $1,500.First, we determine the amount paid in rent per diem. This equals $1,500 divided by 31 days (since there are 31 days in the month of October), which gives us $48.3871 per diem.Next, we count the number of prorated days for rental income starting the day after closing and until the end of the month. This equals 31 days minus 18 days, which gives us 13 days. multiply the rent per diem by the number of prorated days. This equals 13 days multiplied by $48.3871, or $629.03.This means the buyer will receive a credit for $629.03 at closing, while the seller will be debited the same amount.
monthly principle and interests payment formula
We'll assume the loan amount is $575,000 at a 5.5% interest rate. The loan is fully amortizing with a 30-year term.The first step is to determine the factor. The chart will show us that the factor for a 30-year loan at 5.5% interest rate is 5.68.Next, we divide the loan amount by $1,000. This equals $575. Finally, we multiply $575 by the factor of 5.68. This gives us a total monthly principal and interest payment of $3,266.
promissory note
a written contract with a promise to pay a supplier a specific sum of money at a definite time
2010 Dodd-Frank Act
amendment in 2008 to RESPA
the outstanding interest rate multiplied by the balance is?
annual interest paid
what is adjusted on settlement statement to ensure it is balanced?
cash from buyer on buyer side, cash to seller on seller side
what is least likely to render a title unmarketable
easement as it runs with the land
what gives the lender the ability to raise the interest rate in an assumed loan?
escalation clause
VA fee for 100% financing
funding fee / there is no mortgage insurance on VA loan
calculating insurance
if a buyer is purchasing a $620,000 house using a $570,400 loan, how much is paid each month in PMI if the lender applies a 0.68% PMI fee? To find this, we first multiply the loan amount by the PMI fee. This will give us the amount paid per year for the PMI fee. This equals $570,400 multiplied by 0.0068, which gives us an annual PMI fee of $3,878.72.Next, we divide $3,878.72 by 12 months to get a monthly PMI fee of $323.23. Unlike PMI, MIP requires an upfront fee, which may be rolled into the loan amount, plus a monthly insurance premium.
RESPA requires 3 days for lender to give buyer 2 things
informational booklet called "Your home loan toolkit: A step-by-step guide." The toolkit explains the costs associated with closing the loan. Loan Estimate, or LE. This three-page form is highly structured, and every Loan Estimate has the same sections, laid out in the same order, providing the same kind of information.
cloud on title
is anything that casts doubt about a seller's title. If a cloud on the title exists, the seller must clear up the issue before the sale can close.
1099-s exclusions
isn't necessary for a gift or a bequest. And if the transfer satisfies a debt secured by the property, as with a foreclosure or abandonment, then 1099-S isn't required. You also don't have to file if the gross proceeds are less than $600. Or if the transferor is a corporation, a governmental unit, or an exempt volume transferor. The biggest exclusion of all, though, is the sale or exchange of a residence for $250,000 for single filers or $500,000 for joint filers. Form 1099-S is not required for those sales, provided the seller certifies that the seller used property as a residence for at least two years out of the last five.
BRRETA
it governs the relationships between licensees and their clients or customers.
CD must be given 3 business days
not including Sunday or holidays
debit
that which is due from one person to another.
who files 1099-S
the person responsible for closing the transaction." In most circumstances, that person will be the settlement agent named in the closing statement. If the closing statement doesn't name the settlement agent, then the Code provides an ordered list of people who are responsible. If there is no closing statement, then responsibility falls to the buyer's attorney, if the attorney comes to the closing. If the buyer's attorney doesn't come, then the seller's attorney is responsible, if present. If no attorneys come to closing, then the entity that distributes the money becomes the responsible person, whether it be a disbursing title company, an escrow company, or the seller's great uncle Ned. First up is the mortgage lender. If there is no mortgage lender, then the seller's broker is the responsible party. If there is no seller's broker, then the buyer's broker is the responsible party. No lender and no broker? Well, then it's up to the buyer to file 1099-S.
Total Interest Percentage, or TIP,
the total amount of interest the buyer will pay over the life of the loan as a percentage of the amount borrowed. For example, if the buyer borrows $100,000 and pays $56,000 in interest over the life of the loan, the total interest percentage, or TIP would be 56%. The TIP helps borrowers compare loans using the same metrics.
how do title searcher search a title
through index of land records
calculating taxes
you have to determine the amount paid per month in taxes and insurance by simply dividing by 12 months. For example, if the annual property taxes amount to $6,500, how much is paid in taxes each month in escrow? To find this, we divide $6,500 by 12 months to get $541.67.