How can HUD-1 help you create your business?
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The HUD-1 is a standard form that you use frequently. This form can be used not only as a settlement statement, but also as proof of payment for different tax breaks. Understanding forms and tax exemptions and communicating them to your customers will help your customers reduce taxes, help build trust and gain more business exposure.
What is HUD-1
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HUD-1 is a table used by settlement agents [closing agents] to list all income funds item by item and all fees paid and accumulated by the borrower and seller for real estate transactions.
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When will the HUD-1 be released?
The Real Estate Settlement Procedures Act [RESPA] requires this form to be published in all US real estate transactions involving federally related mortgages. RESPA states that you should obtain a copy of HUD-1 at least one day prior to settlement.
When does the customer need a HUD-1 tax?
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Customers use the information contained in the form when submitting the annual tax. The application deadline is usually April 15 of each year. In order to allow customers sufficient time to submit taxes using HUD-1 information, it is recommended to send a copy of HUD-1 to the customer in January.
Since real estate transactions occur in a year, usually long before the tax return is filed, the HUD-1 handed over to the customer at the time of closure may be lost or misplaced. Sending a copy of HUD-1 with a cover letter to the customer will be very useful and saves customers time.
HUD-1 customer sample letter
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Here's a sample letter that you can use to send customers:
[date]
Tax time is up
Dear [customer name]:
The tax time is indeed coming, the first thing you need is a copy of the settlement statement on your property. Moving can be a very busy time, and you may have misplaced this very important file.
I want to make sure that you take advantage of all the tax benefits that our transaction may bring. If your accountant has any questions, ask him or her to call me [if you need to refer a accountant you can trust, I will be happy to provide you with one].
I look forward to continuing to be your real estate agent and provide you with the highest level of service.
Sincerely,
[your name]
Oh, by the way... If your friends or relatives are considering buying or selling a home, I would be happy to serve them. So, when you think of these people, just give me a call and tell them their name and number. I am happy to follow up and tend to their real estate needs.
Which HUD-1 information is important to your customers' taxes?
The information reported in HUD-1 relates to the following tax statements and timetables:
Tax return HUD-1 line
Schedule A [item-by-item deduction], line 10 - Annual mortgage interest deduction line 901
Schedule A [item-by-item deduction], line 10 - deduction line 802
Schedule A [item-by-item deduction], line 6 - real estate tax deduction of 1003 lines, 1004
Schedule E [rental income], line 20 - depreciation [requires property costs] line 101, 102
Schedule E [rental income], line 12a - Mortgage interest deduction line 901,802
Schedule E [rental income], line 9 - Insurance 903, 1001, 1002
Schedule E [rental income], line 16a - State tax 1003, 1004
Schedule E [rental income], line 18 - other deductions 703, 801-811, 1005, 1101-1101, 1201-3, 1301-1302
Schedule D [Capital Gains] Part I, Part II, Column d - Sales Price 401,402
Schedule D [Capital Gains] - Part I, Part II, Column E - Cost or Other Basis 101,102
Form 6252 [instalment payment], line 8 - sale price 401,402
Form 6252 [sales sales], line 8 - cost or other basis 101,102
Form 4797 [sale of commercial property], part one, column d - fees or other basis 401,402
Form 4797 [sale of commercial property], Part 1, paragraphs f-101, 102
Two parts of HUD-1
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Section J, Borrower Transaction Summary
This section contains six sections that basically summarize the entries for Part L [see below for settlement fees].
o Section 100, the total amount payable by the borrower
o Section 200, the amount of the borrower or borrower borrowing
o Section 300, settlement cash from/to the borrower
o Section 400, the total amount of the seller
o Section 500, reducing the amount of the seller
o Article 600, cash settled by the seller
Section L, settlement fees
This is where many entries are listed before being submitted to page 1. The column contains the fees paid from the borrower's or seller's funds. Your end statement may not have an entry in all rows.
o Article 700, Institutional Committee
o Section 800, loan related project
o Article 900, the project that the lender requires to pay in advance
o Section 1000, Lender Deposit Reserves
o Section 1100, title fee
o Section 1200, government records and transfer fees
o Sections 1300 and 1400, additional billing fees and totals
Line by line description
Article 700, Institutional Committee
701 commission paid to the real estate agency
702 commission paid to the real estate agent
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Article 800, payables related to loans
801 handles or initiates a loan fee. If the fee is a percentage of the loan amount, the percentage will be stated.
802 "points" charged by the lender. Each point is 1% of the loan amount.
803 appraisal fee. If you pay by loan application before closing, you should mark it as "POC" [payable at checkout]. The amount will be displayed, but not included in the total billing fee you bring.
The fee for the 804 credit report, if it is not included in the origination fee.
805 inspection fee, which should be requested by the lender.
806 Private Mortgage Insurance [PMI] application fee.
807 assumes the fee when the buyer takes over the seller's existing mortgage.
808 Miscellaneous items related to loans, such as fees paid to mortgage brokers.
809 Miscellaneous items related to loans, such as fees paid to mortgage brokers.
810 Miscellaneous items associated with the loan, such as fees paid to the mortgage broker.
811 Miscellaneous items related to the loan, such as fees paid to the mortgage broker.
Article 900, the item that the lender requires to pay in advance
901 The interest charged at the time of settlement between the settlement and the first month payment.
Mortgage insurance premium due at 902 settlement. The custody reserve for mortgage insurance will be recorded later. If your mortgage insurance is a one-time payment for the loan term, you should be aware.
903 Hazard insurance premium due at the time of settlement. It is not used to enter the custody of the insurance reserve.
904 Other items: flood insurance, mortgage life insurance, credit life insurance and disability insurance.
905 Miscellaneous: Flood Insurance, Mortgage Life Insurance, Credit Life Insurance and Disability Insurance.
Article 1000 Deposit of the lender's reserve
1001-1007 is used to start the funds of the borrower's escrow account, and the lender will pay the premium for next year. Each mortgage payment includes an amount to cover a portion of these recurring charges.
1008 The settlement adjustment calculated by the settlement agent by comparing different hosting formulas to ensure that the lender does not charge more than the permitted custody funds.
Section 1100, Title Fees
1101 settlement agency fee.
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Abstract or title search and review fees are entered by line
1102 abstract / title search fee
1103 exam fee
1104 Title Insurance Adhesive [also known as Insurance Commitment]. Payment for the title policy will be entered later.
1105 contract preparation records the charges and work of mortgages and bills
1106 fees charged by the notary to verify the execution of the settlement documents
1107 attorney fees.
1108 title insurance [except for the cost of binders].
1109 Information hotline for disclosure of individual title insurance policy costs [1108 lines only.]
1110 Information unit discloses the cost of a separate title insurance policy [only line 1108 is carried forward.]
1111-1113 Other ownership-related fees vary by location: tax certification fee / private tax
Section 1200, Government Records and Transfer Fees
1201 recording fee
1202 city or county recording fee
1203 national recording fee
1204-1205 Other recording fee items
Section 1300, Investigation and Inspection Fees [for pests, lead paint, enamel, structural inspection, heating, plumbing or electrical equipment inspection] and home warranty.
1400 lines of total settlement fees paid from the funds of the borrower and the seller. They also enter the J and K sections,
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Lines 103 and 502.
Section J, Borrower Transaction Summary
Section 100, Total amount payable by the borrower
The total sales price of the 101 line property.
Personal property charges for line 102 [帷幔, washing machine, dryer, outdoor furniture and decorations purchased from the seller]
Settlement fee charged to the borrower on line 103 [from section 1400 of line 1400]
Lines 104-105 Borrower's arrears or payments previously made by the seller [if the borrower assumes the loan, it includes the balance in the seller's escrow account, and the uncollected rent may owe the seller]
Lines 106-112 prepaid by the seller [proportional allocation of city/county tax]
The total amount payable by the borrower on line 120. Lines 101 to 112
Section 200, the amount of the borrower or borrower borrowing
Line 201 The buyer's credit for the deposit paid upon receipt of the offer.
202 new loans that the lender pays to the borrower.
Line 203 loan borrowers assume or acquire ownership based on existing loans or liens.
Lines 204-209 Miscellaneous items paid by the buyer or on behalf of the buyer [subsidies made by the seller for repair or replacement of goods or notes accepted by the seller from the borrower...
Orignal From: HUD-1 as a marketing tool - for real estate agents
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