A Website Make-Over

We’ve just revamped our website a bit …

http://www.hornungscimone.com/

Have a look and let us know what you think!

‘Mortgage Forgiveness Debt Relief Act’ May Be Back in Bloom This Spring

A recent Daily Herald article by Ken Harney, “Mortgage Debt Forgiveness Back on Table,” shares some uplifting news for homeowners—specifically those who are considering or in the process of a short sale.

Expected sometime this spring, the Senate Finance Committee under new Chairman Ron Wyden, a Democrat from Oregon, will supposedly take up a so-called “extenders” package.

According to a source with direct knowledge of the committee’s plans, “This is high on Wyden’s priority list.” This is quite the contrast from last year when the then-Chairman, Max Baucus, let both corporate and individual tax benefits expire. The House also took no action to extend.

But now, there are strong signs that at least some of the expired housing benefits could be blooming on Congress’ spring to-do-list.

According to Hanrey, “Tops on the list is the ‘Mortgage Forgiveness Debt Relief Act’, a law that has saved large numbers of homeowners from hefty tax bills — close to an estimated 100,000 taxpayers in 2011, the latest year for which IRS estimates are available. First enacted in 2007 with menacing clouds of the housing bust on the horizon, the law carved out a special exception to the general rule in the tax code: When you are relieved of a debt burden by a creditor, the amount forgiven is treated as income subject to taxation at ordinary rates.”

So, for qualified homeowners whose mortgage debt was reduced or written off by lenders in connection with loan modifications and short sales, the law allowed for the forgiven amounts to be un-taxable at a federal level. However, the 2007 carve-out for mortgages was temporary. Congress was required to extend it periodically — which it failed to do this past December 31st.

“Though an extenders bill is on the horizon, [that’s not a] guarantee that any specific tax law provision will be part of the bill the Finance Committee ultimately considers. The committee has asked members to suggest what they think should be part of a final package, which may or may not include all the housing-related provisions.” But bipartisan support for mortgage debt forgiveness renewal is strong—with a push for an extension through 2015 and some form of renewal.

Although Capitol Hill is only beginning the process, “the outlook for renewal of mortgage forgiveness debt relief, and possibly other housing benefits, looks more promising now than it has in months.”

Here’s to hoping that this bud of a ‘Mortgage Forgiveness Debt Relief Act’ flowers sometime soon.

 

A Check Made Payable to Yourself for Closing

One of the most common questions we are asked on the day before the closing is:

“I was told to bring a cashier’s check to the closing, made payable to myself…why can’t I just make it out to the closing company?”

It’s a relatively common approach to have the cashier/bank check made payable to yourself. When the closing goes smoothly, you endorse the check and give it to the closing attorney. In the rare event that the transaction does not close, it’s easy to keep the funds by depositing the check back into your account.

The closing attorney has a responsibility to ensure that all funds for the closing are deposited and cleared before recording the deed and mortgage to a property.  Since a personal check can take several days (or longer) to clear, certified funds in the form of a cashier’s check are required so that the closing is not delayed.

You will still be asked to bring your personal checkbook in the event that any last minute changes are necessary, but the best way to make sure that the closing goes smoothly is to bring that cashier’s check made payable to yourself (your own name).

NOTE: Don’t actually write “Yourself” on the check! …Yes, it has happened! Write your name. So if you are Sally Smith, have the check payable to “Sally Smith.”

 

Six Financial Reasons to Buy a Home

Homeownership can be justified for many reasons—a major one being that it makes sense financially. How so, you may ask? Here are six financial reasons why people should consider buying a home.

1. The purchase of a home is an investment.

Many Americans are not interested in investing in stocks and bonds, and there aren’t many lenders out there willing to lend to the ones who are interested. As such, homeownership is a typical “safe” method of investment, as homeowners are investing with leverage in something that appreciates at the rate of inflation.

2. Owning a home is usually a form of “forced savings.”

Saving is one of those things that everyone knows is important, but many struggle with. As a homeowner, you will have to overcome that tendency to defer savings till another day.

3. You’re going to pay whether you rent or own.

By owning a home and paying a mortgage, one is essentially putting money in his/her own pocket. Renting on the other hand is putting it in someone else’s. For example, if you buy a home on a 30-year fixed mortgage and make your payments every month, at the end of 30 years you own a house you can sell. Whereas if you rent, at the end of 30 years all you’ll have is another rental contract. It’ll be the landlord who’ll walk away with something!

4. Homeownership is a hedge against inflation.

Your payment will stay the same (assuming you have a fixed rate). It’s hard to imagine rent staying stable year after year. It’s hard to imagine interest rates staying stable for year after year. More often than not, housing costs and rents have tended to go up at or higher than the rate of inflation.

5. The tax benefits are pretty substantial.

If you are a homeowner, you can deduct mortgage interest and property taxes from your income. To add to this, are the capital gains that are excluded from income if the home is sold for a gain. Up to $250,000 is excluded from income if one files singly; and for married couples, it is up to $500,000.

6. Your credit score can get a boost.

Your credit will benefit if you’re making your mortgage payments on time and showing that you are financially stable and responsible. Good credit can be a powerful tool in many aspects of your life.

*For more info, check out Eric Belsky’s paper The Dream Lives On: the Future of Homeownership in America.

I’ve lost my deed, how do I get another one?

It happens. You’re in the middle of moving and misplace it; you file it away and forget where; you throw it in a pile of other things and it gets taken out to the curb with the rest of your recycling…It happens.

Although you could continue to tear apart every file, storage box, and closet; or perform a deed-location-interrogation on your family and friends (hey, maybe they saw it last time they were over?!); you could also just take a deep breath and relax.

You see, a deed is a legal document that proves you own your home. The deed to your home is filed with the registry of deeds in the county in which the real property is located. Recorded deeds are public records, and therefore, are available to anyone who wishes to view or have a copy of them. 

Now, there are several ways you can obtain a copy of your deed- in person, online, or even through the Title Company or attorney who helped with your closing.  

In Massachusetts, county registries can be found online at www.masslandrecords.com.  This is a site where property records (at least since 1976 or so) can be searched by name, property address, or even by the book and page number of the document.  For most purposes, it’s as easy as searching for your name, and printing out a copy of your deed. Some counties provide copies for free, while others charge a small fee per page.

If your deed was recorded prior to 1976, or if it is recorded in a county without free printing, you’ll either have to go to the county registry yourself to purchase a copy of your deed, or you can mail in a request with the fee and a self-addressed stamped envelope. It’s best to check with the county recorder what the fees are before you send your request in, as different counties have different costs and requirements. 

As long as your deed was recorded at the Registry of Deeds- you don’t need the original.

The Dos and Don’ts When Applying for a Mortgage

You’ve made a decision to buy a house. Congratulations!

Now it’s all about how to finance your big purchase and get pre-approved for a mortgage.

Even if you have good credit, there are things you can do to make lenders think twice. It’s your responsibility to make sure that doesn’t happen. So what should and shouldn’t you do?  Check out our lists below to find out.

The Top 10 Dos and the Top 10 Don’ts When Applying for a Mortgage

DO:

1.  Do keep paying bills on time. It sounds simple, but every 30-, 60- or 90-day delinquency on a loan, credit card, or any other account, will reduce the credit score the lender ends up considering as part of your loan file. That score will then determine whether or not they’ll approve you for a loan; and how good of one it will be.

2. Do let the lender know of any major changes. A change in your job or in your finances is significant information for the lender.

3. Do continue to use your credit. Use your credit as you normally would (so long as your ‘normal’ means paying on time!) If it appears you’re diverting from your usual spending patterns, it may cause your score to go down.

4. Do keep your same insurance company.

5.  Do send in the requested documents to the lender in a timely manner. The more responsive you are, the quicker and less painful the process will be.

6. Do be realistic. It’s important that you don’t throw caution to the wind and buy way more house than you can afford. Figure out what your financial floor and ceiling is and aim somewhere on the wall.

7. Do save, save, save! Increase the size of the down-payment you’re able to make by saving as much as possible, as often as possible.

8.  Do keep originals. Stay organized and keep the originals of all pay stubs, bank statements, and other important financial documentation in a safe place. Keeping a paper trail of all large deposits into your account, as well as balance transfers is also important.

9. Do communicate with your loan consultant. If you ever have any questions or uncertainties, it is better to ask and talk about them earlier than later. Also, if you do end up having significant changes to your job or finances during the process, it is imperative to pass along this information as soon as possible.

10. Do stay positive and be patient. Yes the process may take longer than expected, and yes you may have to dig through your papers to find everything the lender needs. But just think of the prize at the end of it – your new home.

DON’T:

1. Don’t lie on your loan application. Sounds simple and straight-forward, right? For some, it’s not. Be as open and precise as possible –don’t leave out any debts or liabilities you have and don’t fudge your income. It’s fraud. So that pesky pending lawsuit, the layoff notice you just got at work, your unpaid child support, or the fact you haven’t actually filed a tax return since 2010—all these pertinent details matter.

2. Don’t change your job before applying for a home loan. In addition, now is also not the right time to become self-employed or quit your job. You want to show stability, which translates to lenders as you being less likely to default on the loan.

3. Don’t raise red flags to the underwriter. Like your employment, you want to show stability in as many facets of your life as possible. So, don’t change your name or address; don’t change banks; don’t change investments; don’t move, open, or close accounts; don’t co-sign on another person’s loan; take out another loan, etc. The less activity that occurs while your loan is in process, the better.

4. Don’t make any major purchases over the next couple of months. For example, do not buy a car. A significant debt, such as an auto loan will look bad to the mortgage lender’s credit scoring system. Buying one increases your debt-to-income ratio and that’s something loan officers don’t want to see. Buying furniture or appliances on credit count here too—as these bigger-ticketed items reflect in your debt-to-income ratio. So wait to make those major purchases AFTER you get your mortgage. Now is not the time.

5. Don’t be late on your credit card payments or charge excessively. You need a track record of financial responsibility to show that you can manage your money.

6. Don’t consolidate credit cards. Your ratio of debt to available credit should remain as stable as possible. Also, you want to keep active, beneficial credit history on your record.

7. Don’t pay off collections or charge-offs. Unless instructed to do so to secure the loan, refrain from paying these off as doing so generally results in a drop in your credit score.

8. Don’t make large deposits into your bank accounts. Deposit amounts that exceed your past history’s patterns will be questioned by an underwriter, unless the deposit is a documented gift. As for your down-payment funds; the lenders like that money (the bulk of it at least) to be sitting in your account for at least two months.

9. Don’t have inquiries made into your credit. Looking for new credit  =  higher risk for lenders. If the inquiries are related to your mortgage search, it usually doesn’t affect your credit score as the assumption is that you’re rate shopping. But opening credit accounts within a short period of time represents risk and your credit may take a hit. It’s probably not a huge factor in calculating the ability for you to repay a loan but why risk it?

10. Don’t just get pre-qualified. Get pre-approved! Getting pre-approved for a mortgage also enables you to move quickly when you find the perfect place. When you make an offer, it won’t be contingent on obtaining financing, which can save you valuable time. In a competitive market, this lets the seller know that your offer is serious – and could prevent you from losing out to another potential buyer who already has financing arranged.

When “You’ve Got Mail” Turns into “You’ve Got a Contract!”

Let’s face it; we live in a digital age where technology is the go-to medium when it comes to communicating in both our personal and professional lives. Business is now conducted less and less in a conference room, and more and more through email, text, and other forms of digital communication. And why not?  Technology allows us to often get things done a lot more efficiently and effectively, and saves us from having to schlep from place to place to deliver and receive information and documents.

This is true for many industries—especially for real estate. No longer is a hand delivery of a signed offer the only way to begin a transaction. With email, fax, texting, etc., it is common for the terms of a transaction to be negotiated and accepted without ever signing a formalized, original agreement in person.

What complicates things a bit more is that communications are often had between the buyer’s agent and seller’s agent—not necessarily the buyer and seller directly. So, the question is—will emails from their respective agents bind the buyer and seller?

In a recent article “Agent’s Email Exchange May Create a Binding Contract” by Robert S. Kutner, Esq., the fine line of what may or may not be seen as an agreement via digital communication is looked at. The article specifically refers to the 2012 case, Feldberg v. Coxall, whereby the buyer, Feldberg, claimed that the exchange of emails by his agent (an attorney) and the seller’s agent (also an attorney), formed a binding contract for the purchase of two pieces of land in Sudbury, MA.

Though the lawsuit was dismissed after the buyer and seller came to an agreement, the case and some of the rulings are important to note. Specifically, that email negotiations between a buyer’s and seller’s agents MAY be proof enough that the parties have reached an agreement on “all material terms” for a transaction and “intend to be bound,” regardless of whether a more formal agreement was contemplated. As the article states, emails ‘may provide a basis for a disappointed buyer or seller to file suit.’

Though the Feldberg v. Coxall ruling(s) are not binding on any other courts, it is reason enough for ‘realtors to exercise care when communicating terms for a transaction on behalf of their clients.’ Having a disclaimer at the bottom of emails would be wise to include too—for extra precaution.

The last thing you would want is for “You’ve Got Mail” to turn into “You’ve Got a Contract” without realizing it.

Title Insurance 101

What is Title Insurance?

Title insurance is used to ensure the credibility of the “record” title to a property as it is recorded in the local registry of deeds. While a careful review of a property’s deed is usually performed by a certified attorney before closing, defects can (and do!) go undetected. Title insurance is used to protect both lenders and property owners from losses due to these defects. 

Protecting the interests of lenders and property owners is done in two parts:
1. Loan Policy – this protects the lender’s interest in a property.
2. Owner’s Policy – this is designed to protect the property owner.

The lender will always require a loan policy to protect its mortgage interest in the property, but often owners go unprotected.

Why should you say “Yes” when asked if you want an ‘Owner’s Title Insurance Policy’ at your closing?

1. An Owner’s Policy is your best protection against possible title defects that could result in claims against your property.
For a one-time premium, an Owner’s Policy is your best protection against potential title defects that could deprive you of your ownership rights. In the event of a claim, the title insurance company will either correct covered title problems or will reimburse you for insured losses up to the amount of the policy, and will defend against any lawsuit attacking your title as insured.

2. The Loan Policy issued to your lender does not protect you.
The lender requires a Loan Policy to protect its mortgage interest in your property. While the premium for this policy is included in your closing costs, it does not protect you and you cannot make a claim if you suffer a loss.

3.  An Owner’s Policy insures against title defects that are not covered by an ‘Attorney’s Certification of Title.’
An ‘Attorney’s Certificate of Title’ is an opinion of the quality of the “record” title, based on a review of the public records at the registries of deed and probate. However, the certifying attorney may not be responsible for numerous title defects that would not be found despite the most thorough search of public records, such as:

• Forged documents
• Unknown creditors
• Undisclosed or missing heirs
• Missing signatures
• Mistakes in recording
• Incapacity of a grantor

All of these hidden defects and many more are covered by the Owner’s Policy. The attorney’s certification covers those matters that could reasonably be discovered during the timeframe of the title search. An Owner’s Policy provides the added protection of covering title defects that existed anytime prior to the issue date of your policy.

4.  The Owner’s Policy can help you when you want to sell your property.
Potential buyers or lenders may refuse to purchase or refinance your property if they believe the title is unmarketable. The Owner’s Policy insures against loss of damage that you may suffer as a consequence of the marketability issue, and may enable the sale or financing to go through by offering to insure the buyer or lender against any title defects that may exist.

5. The Owner’s Policy provides you with immediate and expert legal support.
Most claims arise through the rejection of title by the buyer’s attorney. When this happens, it is imperative that the extent of the defect is known immediately, that a plan of action is initiated to remove the defect, and that the work to clear the title is performed diligently and competently. Using in-house experience and knowledge, the title insurance company is able to zero-in on the problem and assign attorneys who are experienced in correcting title defects. If the claim is covered by the Owner’s Policy, all work to remove the defect will be paid for by the title insurance company, including representation of our insured in a lawsuit to establish the title or remove an encumbrance. An Owner’s Policy may save you thousands of dollars in legal costs.

6. To protect what may be the most important investment you will ever make.
 For a one-time premium, an Owner’s Policy remains in effect for as long as you or your heirs own the property. Owner’s coverage gives you peace of mind by protecting the title to your home.

What is the difference between a standard ‘Owner’s Policy’ and an ‘Enhanced Owner’s Policy?’

Title insurance providers have created an ‘Enhanced Policy’ which provides even greater protection for the homeowner. Our office generally will issue you an Enhanced Policy if the property you are buying is owner occupied. Below please find a helpful comparison between the coverage afforded in a standard policy and an enhanced policy:

COMPARISON OF STANDARD AND ENHANCED COVERAGE POLICIES	STANDARD	ENHANCED
COMMON COVERAGE:
Defective Recording of Documents	YES	YES
Improperly executed documents	YES	YES
Third party claims an interest in the title	YES	YES
Pre-policy forgery, fraud or duress	YES	YES
Unrecorded restrictive covenants or easements	YES	YES
Prior recorded liens not listed in the policy	YES	YES
Title is unmarketable	YES	YES
Policy benefits anyone who inherits the property from insured	YES	YES
Legal right of access distinguished from actual right of access	YES	YES
ADDITIONAL COVERAGE PROVIDED BY ENHANCED POLICY:	STANDARD	ENHANCED
Insures the trustee of your estate-planning trust	NO	YES
Insures the beneficiaries of your trust upon your death	NO	YES
Automatic increase in coverage up to 150% not based on inflation	NO	YES
Post policy forgery	NO	YES
Post policy encroachment onto insured property	NO	YES
Right to actual vehicular and pedestrian access	NO	YES
Up to $25,000 coverage for certain losses due to building permit violations*	NO	YES
Up to $10,000 coverage for certain losses due to existing violation of subdivision law**	NO	YES
Post policy structural damage for third party mineral extraction	NO	YES
Violation of restrictive covenants identified in the policy:
Resulting in loss from correction or removal	NO	YES
Resulting in loss of title	NO	YES
Resulting in loss of use where single family dwelling is prohibited	NO	YES
Forced removal of existing structures that:
Encroach onto an easement identified in the policy	NO	YES
Violate a building restriction line identified in the policy	NO	YES
Encroach onto neighbors land ** if boundary wall or fence ***	NO	YES
Land cannot be used for a single family dwelling under zoning ordinance	NO	YES
* Deductible of 1% of policy amount or $5,000, whichever is less
** Deductible of 1% of policy amount or $2,500 whichever is less
***Maximum coverage of $5,000

The information taken for this charge is taken from the Fidelity Title Insurance page at https://www.fntic.com/HomeOwnerspolicy.aspx and First American Title Insurance page at http://www.firstam.com/assets/homebuilder/homebuyer/eagle-protection-owners-policy.pdf

 

Questions and Cost of Title Insurance?  
Please contact our office at 508-651-1090 and we will gladly discuss any questions you may have regarding title insurance and the costs associated with its purchase.

A Complete Understanding of the HUD Settlement Statement

The ‘HUD-1 Settlement Statement’ is one of the most important documents with any real estate closing transaction. It is a detailed breakdown of all of the credits, costs, and fees associated with either the sale,  purchase, or refinance of a home and is a useful tool for buyers/borrowers, and sellers to review prior to arriving for their transaction.

The HUD is a three page document. Page one and page two have both a left hand column of numbers (which apply to the buyer or the borrower) and a right hand column of numbers (which apply to the seller). In order to avoid confusion, it is a helpful rule to instruct buyers or borrowers to only look at the numbers in the left hand column and the sellers to look only at the numbers in the right hand column of pages one and two.

To follow along (if you do not have a HUD in front of you), click here for a blank HUD.

For Buyers/Borrowers:

Page one is the summary page of the transaction and it includes the “total settlement charges” from page two (Line 1400). The total of the page two charges are brought over to the summary, page one on Line 103.

There are three sections of numbers on page one:

• The 100-section is all of the CHARGES associated with your transaction
• The 200-section is all of the CREDITS associated with your transaction
• The 300-section is the difference between the total charges and the total credits for the transaction. The amount you are required to bring to closing (generally in the form of a bank or certified check) is listed on Line 303

HUD PAGE 1-SUMMARY PAGE

HUD 100-Section:

• If your transaction is a purchase, the purchase price is listed on Line 101
• The total of your charges on HUD page two (Line 1400) is carried over to Line 103 so that this summary page is inclusive of the fees on page two
• Line 106 is a reimbursement from you, as the buyer, to the seller for real estate taxes that the seller has prepaid. This adjustment is from the day of the closing to the end of the tax period for which the seller has prepaid
• The other 100-section lines can include other charges from you such as: final oil tank adjustments, condo fee adjustments, or other payments that are being made by you for this transaction
• The total of all of the fees in the 100-section is totaled on Line 120

HUD 200-Section:

• If your transaction is a purchase, the total deposit you have already tendered on the transaction is listed on Line 201
• The loan amount you are borrowing is listed on Line 202
• Additional credits due to you, such as a seller closing cost credit or a lender closing cost credit, are listed in the 200-section as well
• Line 210 is used for a credit, to you, from the seller for any real estate taxes that have not yet been paid but are indeed due. The payment of these taxes will be your responsibility in a future tax bill
• At times, a credit from the seller will appear in the 200-section for the final water/sewer bill(s) not yet due for the amount the seller is responsible for up to the date of closing. In this case, you (as the new owner) will receive a water/sewer bill at some point in the future. Part of that future bill will include the amount of the seller’s share of these utilities, which you are being credited at the time of the closing
• The total of the credits in the 200-sction is totaled on Line 220

HUD 300-Section:

• The total of the 100-section costs (Line 120) is brought down into Line 301 (“Gross Amount Due from the Borrower”)
• The total of the 200-section credits (Line 220) is brought down into Line 302 (“Less Amount Paid By/For Borrower”)
• The  difference between the total charges as listed on Line 301 (copied from Line 120) and the total credits as listed on Line 302 (copied from Line 220) is calculated on Line 303. This is the amount that is either needed from you, as bank or certified check, for your closing. In the case of a cash-out-refinance, this would be the amount of the net-proceeds check you are receiving as a result of the closing transaction.

HUD PAGE 2-SETTLEMENT CHARGES

As described above, the total of the charges on this page is brought over to Page 1 on Line 103. It is important though to review this page for the accuracy of the charges.

The total listed on Line 1400 (page 2) is the sum of all of the fees listed in that column directly above the line. You may notice some fees are not listed directly in that column, but rather under the “POC” description. “POC” means “Paid Outside of Closing” and you may see this on Line 804 (for the appraisal if it has been prepaid by you) or line 903 (for the insurance binder you may have already prepaid). These entries are more for book-keeping purposes and these “POC” amounts ARE NOT CARRIED OVER TO THE COLUMN which, when added together, equals Line 1400. 

HUD 800-Section—Lender/Bank Fees:
This section includes all of the fees you pay to the lender/bank for the items that they require to grant you the mortgage. This includes any origination charges or points (as listed in Lines 801 and 802). The total of these two lines appears in the column of fees on Line 803.
The appraisal fee, the credit report fee, a tax service fee (if applicable), a flood certification fee (if applicable), as well as any other fees the lender may be charging you, will also appear in the 800-section of Page 2.

 HUD 900-Section—Items to be Paid in Advance: 

• Line 901 is the prepaid interest you are paying on your new loan from the closing or disbursement date of your transaction thru to the end of the current month. Generally, interest on a mortgage is paid in arrears so that, for example, a mortgage payment due on February 1 includes, as part of the payment, the interest on your loan from January 1 thru January 31. The odd number of days of interim prepaid interest is charged to you at closing and is listed on Line 901
• Line 902 is the prepaid or upfront Mortgage Insurance Premium you are paying as part of your closing (if your loan requires mortgage insurance)
• Line 903 is the Homeowner’s Insurance payment which is either: charged to you and paid at closing (in which case the cost is listed in the column), OR is noted as “POC” (paid outside closing) if you have paid the first year’s premium prior to the closing
• Line 904 is for Flood Insurance payments (if required)

HUD 1000-Section- Reserves Deposited with the Lender:
If your lender is requiring that you escrow for hazard and/or flood insurance, mortgage insurance, or property taxes, you will be required to pay an upfront reserve as part of your closing costs for the items your lender will be escrowing. The purpose of this reserve is to make certain that there are always enough funds in your escrow account to pay the bills as they become due.

HUD 1100-Section:
This section is for attorney fees and title insurance fees associated with your closing.

• Line 1101 is the combined total for:
  • The attorney fee listed outside of the column in Line 1102;
  • The mandatory lender’s title insurance fee, listed outside of the column in Line 1104;
  • And any fees that may be listed on Lines 1109 or 1110 that are listed outside of the column

HUD 1200-Section:
Similar to how Line 1101 is the summation of several lines, Line 1200 is the summation of:

• The costs to record the new deed (if applicable)
• The costs to record the new mortgage (Line 1202)
• The fees listed on Line 1206 that appear outside of the column
  •  Line 1206 is usually reserved for things like the recording of the Municipal Lien Certificate from the town, and perhaps a Declaration of Homestead

HUD 1300-Section:
This section is reserved for additional settlement charges that may be required by your lender or that you may have opted to purchase for your own benefit. If the items listed in this section are broken down with the amounts due outside of the column, the total from this section appears on Line 1301. If the line item charges appear directly in the column, they show as separate amounts due (and are not totaled in Line 1301). Depending on your lender requirements, this section can include things like: a plot plan, private representation, or perhaps the preparation of optional documents like the Declaration of Homestead.

HUD 1400-Section:
This section is the total of all of the fees charged to you on page two and this amount is carried over to the summary page, page one, as previously described.

HUD PAGE 3–COMPARISON OF GOOD FAITH ESTIMATE (GFE) & HUD-1 CHARGES

As a result of recent changes in HUD regulations, this page was created to give borrowers a line by line comparison of what had been quoted to them as fees by their lender in advance of the closing and what is actually being charged on the HUD-1 Statement.

Page three is divided into four sections. The first section is a list of charges that cannot increase at all. The next section is for charges that cannot increase in total (for the entire section) by more than 10%. The third section includes charges that can change by any amount.

The final (fourth) section of page three, LOAN TERMS, is basically a snapshot of the loan terms for your specific transaction. In addition to giving basic information like the amount of your loan, the interest rate, and payments due; it also discloses any specific provisions. These may include: a change to your interest rate or loan balance; whether loan payments can increase; whether there is a balloon payment due to the lender at the end of your loan; or whether there is a prepayment penalty. The final box under the loan terms section will detail your full monthly payment including any escrows, if applicable.

If ever you have any questions regarding your HUD-1 Statement, it is important that you contact either your loan officer or the closing attorney prior to completing your loan transaction.

For Sellers:

Page one is the summary page of the transaction and it includes the “total settlement charges” from page two (Line 1400). The total of the page two charges are brought over to the summary, page one, on Line 502.

There are three sections of numbers on page one:

• The 400-section is all of the credits or payments to you associated with the transaction
• The 500-section is all of the CHARGES OR FEES to you associated with the transaction
• The 600-section is the difference between the total credits and the total charges or fees for the transaction. The amount of your proceeds is listed on Line 603

HUD PAGE 1-SUMMARY PAGE

HUD 400-Section:

• On a purchase transaction, the purchase price is listed on Line 401
• Line 406 is a reimbursement to you, from the buyer, for real estate taxes that you have prepaid
• The other 400-section lines can include other credits to you such as: final oil tank adjustments, condo fee adjustments, or other payments that are being made to you for this transaction
• The total of all of the fees in the 400 Section is totaled on Line 420
  • This adjustment is from the day of the closing to the end of the tax period for which you have prepaid

HUD 500-Section:

• Line 501 (Excess Deposit) is any amount due back to you, from the listing real estate agent, for deposits they are holding in excess of what they are due for payment of their real estate commission. Since this payment goes back directly to you from an outside agency, the amount correctly appears as a charge to you/reduction of your proceeds
• Line 502 is the total of the settlement charges carried over from Line 1400 on Page 2 so that it is included in the summary page of the HUD
• Lines 504 and 505 are the lines used to show the amount needed to payoff the mortgages you may have on the property. These must be paid in full and closed out completely by the closing attorney. It is best to ask for the copies of these payoffs from the closing attorney so you can review these amounts
• Line 510 is the amount that you may owe as a reimbursement to the buyer for real estate taxes which are due on the property but that have not yet been paid

The remaining 500 section lines are used for other charges that you may be responsible for such as: attorney fees, final water and sewer bills, buyer closing cost credits being paid by you, retained deposit from the buyer by the real estate agent as payment towards their commission (see below: 700-Section) or other amounts that you may need to pay as part of the closing.

The total of the charges in the 500 Section is totaled on Line 520.

HUD 600-Section:

• The total of the 400-section costs (Line 420) is brought down into Line 601, “Gross Amount Due to Seller”
• The total of the 500-section credits (Line 520) is brought down into Line 602, “Less Amount Paid by/for Seller”
• The  difference between the total credits as listed on Line 601 (copied from Line 420) and the total charges as listed on Line 602 (copied from line 520) is calculated on Line 603
  • This is the amount of the proceeds you will receive from the closing agent
  • Should the amount of your charges exceed the amount of your credits, this section will indicate the amount needed from you at closing

HUD PAGE 2-SETTLEMENT CHARGES

As described above, the total of the charges on this page is brought over to page one on Line 502. It is important though to review this page for the accuracy of the charges. As a general note, the total listed on Line 1400 (page two) is the sum of all of the fees listed in that column directly above the line.

700-Section—Total Real Estate Broker Fees

This section includes the commission payments due to the real estate agents for their assistance in selling your house for you. It seems there is no consistency amongst closing attorneys as to how best to list real estate commissions—especially when the agent is retaining the buyer’s deposit as their payment. Some closing attorneys will list this amount on page one in the 500-section while some will list it here, in the 700-section. Whichever way the closing attorney chooses to list the payment of commission, it should show either as a charge to you in the 500-section OR as a charge to you in the 700-section.

1100-Section 

• This section is for attorney fees due from you
• Some closing attorneys will list their fees in the 500-section and some choose to list their fees to you on Line 1102

1200-Section

• The 1200-section includes the cost to record: any discharges for your mortgage, 6D certificates, or other items required by the seller to record at the registry of deeds to perfect the title
• This section also includes the deed excise tax stamps charged by the Commonwealth of Massachusetts to all sellers
  •  The fee for the stamps is based on your sales price and is calculated at $4.56 per thousand

1300-Section

• This section is reserved for additional settlement charges and fees that may be required for items such as: delivering your mortgage payoffs to the lender, and the fee to track the required discharges for your current mortgages after the closing (so      that the buyer does end up with clear title to the property)

1400-Section

• This section is the total of all of the fees charged to you on page two and this amount is carried over to the summary page as previously described

HUD PAGE 3–COMPARISON OF GOOD FAITH ESTIMATE (GFE) & HUD-1 CHARGES

• This section applies only to buyers and borrowers and does not apply to sellers

If ever you have any questions regarding your HUD-1 Statement, it is important that you contact your attorney or the closing attorney prior to completing your loan transaction.

Selling Your Home? – A Concise List of Seller’s Responsibilities & Expenses

There are many moving parts involved when selling a home. To keep your sale as uncomplicated, stress-free, and seamless as possible, it is important to be aware of your responsibilities and expenses as the seller. Here is a list of things to be mindful of when preparing for, and going through your transaction:

Seller’s Responsibilities and Expenses

1. Obtain legal counsel

• Your attorney will prepare and negotiate the Purchase & Sale Agreement (P&S)
• Your attorney will advise you on any issues or extensions that arise between the signing of the P&S and the closing
• Your legal counsel will draft the deed and power of attorney
  • If a power of attorney is granted, the seller does not need to attend the closing
• Your attorney will review the settlement statement, attend the closing, sign seller’s documents (if under power of attorney), and collect or direct the payment of proceeds

2. Provide your attorney with your current mortgage and equity line information, if any

• This includes: the bank’s name, address, telephone number, your account number(s), and your social security number
• The recording fee for discharging the outstanding mortgage is approximately $75/mortgage, and is collected at closing by the lender’s attorney (if not already included as part of your payoff amount)

3. Obtain documents needed for closing

• Certificate of Compliance for the smoke and carbon monoxide detectors –given  by the local fire department (this certificate is often valid for 60 days)
• Final water and sewer reading
• Title V Certification—this is if you have a private sewer/septic system/cesspool
• Light lien letter (if applicable)
• Wood stove permit (if applicable)—given by local fire department
• Oil tank reading and permit

4. Obtain a clear title

• The title to the property will be searched prior to closing by the buyer’s bank’s attorney
  • o If any title issues are discovered, the seller is responsible for clearing them prior to closing

5. Pay the Massachusetts Excise Stamps

• Payment is collected at closing
• This is a tax on the seller by the Commonwealth of Massachusetts and it is based upon the sales price of the property
• The current tax rate is $4.56 per thousand dollars on the sale price
  •  i.e. A home selling for $100,000.00 would have an excise tax due from the seller of $456.00

6. Have adjustments made (if applicable) at the closing

• Adjustments often made include: unpaid taxes, fuel, water/sewer, oil, and rents

Do you need an attorney for the sale of your home?
At Hornung & Scimone, P.C., it is our mission to provide top legal representation and to make your selling experience as pleasant and as hassle-free as possible. Contact our office today for a free legal consultation – 508.651.1090.