real estate homework
COLLEGE OF BUSINESS FIN 3433: Prin ciples of Real Estate
THE UNIVERSITY OF TEXAS AT SAN ANTONIO REAL ESTATE FINANCE AND DEVELOPMENT PROG RA M
Fin 3433: Closin g Statement Example Notes
Contract Date: April 22, Sale price $150,000, $1,000 Earnest Money to Title Company
Closing Date: June 8 First Mortgage Payment Due: August 1
New Loan (to purchase property) : Research on your own, or you may use the followin g assumptions . Thirty -year
level payment loan for 80% of your house value with 4. 125% note rate, one point origination fee, and one point
discount . (In the example here I use a new 75% LTV loan, 5.875% Note Rate, 1 Point Origination Fee, 1 Point
Discount Fee .)
A S implified Closing Statement Excel spreadsheet is available for download that you will complete as part of this
assignment. Y ou may if you prefer use an actual current Clos ing Statement form . You may use the values shown on
the Example Closing Statement for any fees that are not specific to your property or loan. The Excel file has these
values embedded . Assume a 6% real estate commission to be paid by the seller.
Tax pro ration: Note: Use the most recent tax appraisal for your property. We will assume this is your homestead
so be sure to take the homestead exemption when determining your projected property tax bill. For the example
property, the most current tax from BCAD = $3,860.84 /year. For a 365 day year, this is a daily rate of 10.5776.
Because property taxes will be paid near the end of the year, the seller will credit the buyer the property taxes from
January 1, to June 8, which is a period of 159 days, so t he credit will be 159*$10.5776 = $1,681.85.
Escrows: Although you have a 20% down loan (so we don’t have to make adjustments for mortgage insurance), we
will assume the loan servicer will escrow property taxes and insurance. The servicers will pay the property taxes
after your December 1 payment. In this example, t he servicer will receive 5 payments prior to when taxes are paid
(August – December), which means the servicer needs to collect 7 months’ worth of property taxes at closing, plus
the 2 month reserve so at closing the servicer will collect 9 months of property taxes (Jan – July, plus 2 month
reserve). For this example, the servicer will want 9/12 * 3860.84 = $2,895.63 for property tax escrow funds at
closing.
The first hazard insurance bill of $ 960 will be due at closing, and then every 12 months. There must be enough in
the account each future June 8, for that insurance payment. As of June 1, you will have made 11 payments. The
escrow agent can collect two months reserves at closing , so a total of 3 months of insurance escrow will need to be
collects at closing at a cost of: 3/12* 96 0 = 24 0.
Title Insurance Policies: You can find Texas title insurance policy rates online. When a mortgagee policy is issued
at the same time as an owne r’s policy, there is a $100 flat fee (built into the template).
Prepaid Interest: The monthly interest amount is the loan amount times the rate. For a loan of 112,500 at 5.875%,
the monthly interest is: $112,500*5.875/1200 = $550.78. June has 30 days, so the daily rate is 550.87/30 = $18.36.
Sellers Loan Payoff: Your title search will show the most current lien on the property, and its term. From the last
lien(s) on your subject property you can determine the starting date of the loan, and its term. If the note interest
rate is not given, then use the interest rate you look up in the table of interest rates by month that is available for
this HW. Assume the seller has made the required monthly payments and is current. From this you can compute the seller’s loan payoff. My deed search shows the seller took out a li en of $110,000 during December, four years
and several months ago . As of June 1, the seller will have made 53 mortgage payments. (First payment February 1 ,
four years ago , so has made p ayments for 4 years and 5 months) . For this example I assume the seller had a 6%
loan with a 30 year term.
P/YR=12 PMT(PV= -110000, I/YR = 6, N=360) = 659.51
1 Input, 53 Amort gives Bal = 103,373.05
Plus there will be 8 days of interest, on that balanc e that must be paid at closing
Next Months Interest charge 54 Input, 54 Amort gives Int = 516.87
Divide by 30 for a daily interest rate = 17.23
Multiply for the 8 days of interest 137.83
Total Payoff = 103,373.05 + 137.83 = $103,510.88
