HUD-1 As a Marketing Tool - For Realtors

How Can HUD-1 Help You Generate Business?premiums due at settlement. Escrow reserves for
-----------------------------------------HUD-1 is a standardmortgage insurance are recorded later. If your
form you use very often. The form serves not just asmortgage insurance is a lump sum payment good for
a settlement closing statement, but also as a proof ofthe life of the loan it should be noted.903 Hazard
payment of different tax deductions. Understanding theinsurance premiums due at settlement. It is not used
form and the tax deductible items and communicatingfor insurance reserves that will go into escrow.904
them to your clients will help your clients to minimizeMiscellaneous items: flood insurance, mortgage life
their taxes and help you to build trust and get moreinsurance, credit life insurance and disability insurance
business exposure.What is the HUD-1premiums.905 Miscellaneous items: flood insurance,
-----------------HUD-1 is a form used by the settlementmortgage life insurance, credit life insurance and
agent (closing agent) to itemize all incoming funds anddisability insurance premiums.Section 1000 Reserves
all charges paid and accrued by a borrower and sellerDeposited with Lender1001-1007 Funds used to start
for a real estate transaction.the borrower's escrow account, from which the lender
When is the HUD-1 Issued?The Real Estatewill pay next year's premiums. Each mortgage
Settlement Procedures Act (RESPA) requires that thepayment includes an amount that covers a portion of
form be issued in all real estate transactions in thethese recurring expenses.1008 Escrow adjustment
United States which involve federally related mortgagecalculated by the settlement agent by comparing
loans. RESPA states you should be given a copy ofdifferent escrow formulas to assure the lender does
the HUD-1 at least one day prior to settlement.Whennot collect more escrow funds than allowed.Section
Do Clients Need HUD-1 For Taxes?1100, Title Charges1101 Settlement agent's fee.
-------------------------------------Clients use the informationThe fees for the abstract or title search and
included in the form when they file their annual taxes.examination are entered in lines1102 Abstract / title
The filing deadline is normally April 15 of every year forsearch fee1103 Examination fee1104 Title insurance
the proceeding year. To allow the client enough time tobinder (also called a commitment to insure). Payment
file taxes using the HUD-1 information, it isfor title insurance policies is entered later.1105 Deed
recommended that a copy of the HUD-1 will be sent topreparations record charges and work on mortgages
the client in January.Because the real estateand notes1106 The fee charged by a notary public for
transaction takes place during the year, usually longauthenticating the execution of the settlement
before filing the tax return, the HUD-1 given to the clientdocuments1107 Attorney's fees.1108 Title insurance
at closing time could be lost or misplace. Sending the(except the cost of the binder).1109 Informational lines
client a copy of the HUD-1 with a cover letter will bedisclosing costs for the separate title insurance policies
very helpful and time savings to the client.HUD-1 Client(Only line 1108 is carried forward.)1110 Informational lines
Sample Letterdisclosing costs for the separate title insurance policies
--------------------------The following is a sample letter(Only line 1108 is carried forward.)1111-1113 Other
you can use to send your clients:[Date]TAX TIME IStitle-related charges which vary by location: tax
COMINGDear [Client's Name]:Tax time indeed is justcertificate fee / private tax feeSection 1200,
around the corner, and the first thing you will need is aGovernment Recording and Transfer Charges1201
copy of the Closing Statement on your property.Recording fee1202 City or County recording fee1203
Moving can be a very busy time, and you may haveState recording fee1204-1205 Miscellaneous recording
misplaced this very important document.I would like tofee itemsSection 1300, Survey and inspections fees
be sure you avail yourself of all the tax advantages(for pests, lead-based paint, radon, structural
possible from our transaction. If your accountant hasinspections, inspections for heating, plumbing, or
any questions, please have him or her call me (if youelectrical equipment) and home warranty.Line 1400
need a referral to an accounting you can trust, I'd beTotal settlement charges paid from borrower's and
happy to provide you with one).I look forward toseller's funds. They are also entered in Sections J and
continuing as your realtor and providing you the highestK,
level of service possible.Yours sincerely,[your name]Oh,lines 103 and 502.Section J, Summary of Borrower's
by the way... If any of your friends or relatives areTransactionSection 100, Gross Amount Due from
thinking about buying or selling a home, I'd love to be ofBorrowerLine 101 Gross sales price of the
service to them. So, when you think of these people,property.Line 102 Personal property charges (draperies,
just give me a call with their name and number. I'll bewasher, dryer, outdoor furniture, and decorative items
happy to follow up and tend to their Real Estatepurchased from the seller)Line 103 Total settlement
needs.Which HUD-1 Information Is Important For Yourcharges to borrower (from Line 1400 section L)Lines
Client's Taxes?The information reported in the HUD-1104-105 Amounts owed by the borrower or previously
relates to the following tax statements andpaid by the seller (include balance in the seller's escrow
schedules:Tax form HUD-1 lineSchedule A (itemizedaccount if the borrower is assuming the loan and
deductions), Line 10 - Annual mortgage interestuncollected rents borrower may owe the seller)Lines
deduction Line 901Schedule A (itemized deductions),106-112 Item paid in advance by seller (Prorated portion
Line 10 - Points deduction Line 802Schedule Aof city/county taxes)Line 120 Gross amount due from
(itemized deductions), Line 6 - Real estate taxesborrower. Total of Lines 101 through 112Section 200,
deduction Line 1003, 1004Schedule E (rental income),Amounts Paid By or In Behalf of BorrowerLine 201
Line 20 - Depreciation (cost of property is required)Buyer's credit for the earnest money paid when the
Line 101, 102Schedule E (rental income), Line 12a -offer was accepted.Line 202 The new loan paid to the
Mortgage Interest Deduction Line 901, 802Schedule Eborrower by the lender.Line 203 Loan borrower
(rental income), Line 9 - Insurance 903, 1001,assumes or takes title subject to an existing loan or
1002Schedule E (rental income), Line 16a - Real statelien on the property.Lines 204-209 Miscellaneous items
taxes 1003, 1004Schedule E (rental income), Line 18 -paid by or on behalf of the buyer (allowance the seller
Other deductions 703, 801-811, 1005, 1101-1110, 1201-3,is making for repairs or replacement of items or a note
1301-1302Schedule D (capital gain) Part I, II, Column d -seller accepts from borrower for part of the purchase
Sales Price 401, 402Schedule D (capital gain) - Part I, II,price)Lines 210-219 Bills seller has not yet paid, but
Column e - Cost or other basis 101, 102Form 6252owes (taxes, assessments or rent collected in
(installment sale), Line 8 - Selling price 401, 402Formadvance by the seller for a period extending beyond
6252 (installment sale), Line 8 - Cost or other basis 101,the settlement date)Lines 220 Total for all items in
102Form 4797 (sale of business property), Part I,Section 200. The total is added to the borrower's
Column d - Cost or other basis 401, 402Form 4797proceeds.
(sale of business property), Part I, Column f - 101,Section 300, Cash at Settlement From/To
102HUD-1's two sectionsBorrowerLines 301 Summary of the total amount due
--------------------Section J, Summary of Borrower'sfrom the borrower.Lines 302 Summery of all items
TransactionThis section contains 6 sections, andalready paid by or for the borrower.Lines 303 The
basically summarizes the entries made to the section Ldifference between lines 301 and 302 representing the
(Settlement charges, see below).- Section 100, Grossamount of money the borrower owes at closing. If
Amount Due from Borrower- Section 200, Amountsnegative number the borrower will receive funds back
Paid By or In Behalf of Borrower- Section 300, Cashat closing.Section K, Summary of Seller's
at Settlement From/To Borrower- Section 400, GrossTransactionSection 400, Gross Amount Due to Seller
Amount Due to Seller- Section 500, Reductions in(amounts added to the seller's funds)Line 401 Gross
Amount Due to Seller- Section 600, Cash atsales price of the property.Lines 404-405 Amounts
Settlement To/From SellerSection L, Settlementowed by the borrower or previously paid by the seller
ChargesThat's where many entries are tabulated(escrow account's balance or uncollected rents)Lines
before being brought forward to page 1. Columns406-412 Items paid in advance by the seller (prorated
contain charges that are paid from either theportion of city / county taxes)line 420 is the gross
borrower's or the seller's funds. Your closing statementamount due to the seller. Total of Lines 401 through
probably won't have entries in all lines.- Section 700,412.Section 500, Reductions in Amount Due to Seller
Agency Commissions- Section 800, Items Payable in(amounts are subtracted from the seller's funds)line 501
Connection with Loan- Section 900, Items Required byWhen a third party holds the borrower's earnest
Lender to be Paid in Advance- Section 1000,money deposit, and will pay it directly to the seller.line
Reserves Deposited with Lender- Section 1100, Title502 Total from line 1400, the seller's total charges as
Charges- Section 1200, Government Recording andcomputed in Section L.line 503 When borrower
Transfer Charges- Sections 1300 & 1400, Additionalassumes or takes title subject to existing liens which
Settlement Charges and TotalsLine By Lineare deducted from the sales price.line 504-505 First
DescriptionSection 700, Agency Commissions701and/or second loans which will be paid-off as part of
Commissions paid to real estate agencies702settlement (including accrued interest).line 506-509
Commissions paid to real estate agenciesMiscellaneous entriesline 506 Deposits paid by the
Section 800, Items Payable in Connection withborrower to the seller or third party other than the
Loan801 Processing or originating loan fees. If the feesettlement agentline 510-519 Bills unpaid by seller
is a percentage of the loan amount, the percentage will(taxes, assessments or rent collected in advance )line
be stated.802 "Points" charged by the lender. Each520 Total of all items in Section 500. The total is
point is 1% of the loan amount.803 Appraisal fees. Ifdeducted from the seller's proceeds.Section 600, Cash
paid with loan application before closing, it should beat Settlement To/From Sellerline line 601 Gross amount
marked "POC," (paid outside of closing). The amountdue to the seller, from line 420.line 602 Total reductions
would be shown, but would not be included in the totalin seller's proceeds, from line 520.line 603 Difference
fees you bring to settlement.804 Cost of the creditbetween lines 601 and 602. Cash amount paid to seller
report if it is not included in the Origination Fee.805(if a negative number the seller owes money at
Inspections fee, done at the request of the lender.806closing)Tax USA Inc.
Private Mortgage Insurance (PMI) application fee.807------------Tax USA, Inc. is a complete tax, accounting
Assumption fee, when buyer takes over seller'sand financial management firm specializes in small
existing mortgage.808 Miscellaneous items connectedbusinesses, corporations and high income individuals.
with the loan, such as fees paid to a mortgageTax USA Inc.'s mission is to exceed clients'
broker.809 Miscellaneous items connected with theexpectation by providing superb tax, accounting &
loan, such as fees paid to a mortgage broker.810financial Management services. We offer our clients
Miscellaneous items connected with the loan, such astax, accounting and bookkeeping services, CFO
fees paid to a mortgage broker.811 Miscellaneous itemsOutsourcing, Budget Review and Business Plans, Cash
connected with the loan, such as fees paid to aFlow Management, Payroll Services and Entities'
mortgage broker.Section 900, Items Required byIncorporation.Our ClientsWe focus on small and mid
Lender to be Paid in Advance901 Interest collected atsize businesses, non-profit organization and high
settlement for the time period between closing and theincome individuals. Client list comprised of corporations,
first monthly payment.902 Mortgage insurancenon-profit organizations and high-tech employees.