Tp 584 1 fill in form
okay how many people have actually conducted a closing tonight okay so there's there's a fair amount of you so a lot of the information that you've already seen in your pamphlets is pretty basic knowledge but as I attend closings and it's of the first time for a lot of attorneys doing these these closings I try to hit the highlights and most important issues that seems to cause a lot of commotion and disallow the closing from being as smoothly as it can possibly go you guys have probably been in closings of that nature where they have asked their their attorney that's done their will or I know a friend down the street he may practice criminal law and they want them to handle the closing and it's difficult because a lot of the regulations that we encounter in the banking and mortgage industry are changing which seems like on a monthly basis a lot of the main documents that you'll see don't change but there's some key terms that I want to highlight and make you aware of as we go through the the process tonight so that makes that process a little bit easier when you're explaining it to your clients purchasing or selling a home so first of all I just wanted to bring you through the closing process you've gotten the clear to close from the bank which is the biggest hassle these days underwriting requirements as you all can imagine are extremely stringent nowadays you could have the best credit scores in the world you could be buying a small piece of property it could be vacant lands and the underwriting requirements are extremely difficult to maneuver so one of the things I caution my clients when I talk to them in the very outset is patience managing your clients expectations throughout the process even more so in the very beginning is extremely important a lot of people may have gone through the process 15 or 20 years ago and it was really a couple of pieces of paper a handshake the keys were handed across the table along with some checks and they were out the door and it took them 30 days to get there those days are no longer with us the typical closing you can expect to take 45 to 60 days more often than not when a short sales in involved that process can be six to nine months depending upon who you're working with so if you've made it to the closing consider yourselves lucky that's a good thing these days and now it's trying to put all the pieces together obviously you want to invite all the correct people don't forget your title agent don't forget your real estate agents make sure all the attorneys are on board and have everybody there ready to go and prepared to present the checks and go over the closing numbers one of the documents that I have highlighted in the back of the materials is a statement of sale and if you turn it's it's really page five in your materials very basic you don't need much more than this to get everything squared away with your client it's a typical closing statement with the numbers for the seller the credits to the purchaser what checks need to be written and the expenses that are outlined at the lower left-hand portion of the paperwork in the lower right-hand portion for the sellers so it's outlined quite easily of what you need to do it's filling in those blanks ahead of time a lot of that information is gleaned from the contract including the purchase price some of the information that you need for that comes from the title report including the tax adjustments the biggest issue when you're dealing with tax adjustments that you see on that the credits to the seller the credits to the purchaser we have the county and school taxes are the different municipalities that are involved I don't know if anybody's done a closing in Schenectady County recently or in Cohoes they have totally different tax years than the rest of the Capital Region so trying to figure out where you fall in those tax years is pretty pretty difficult not to mention the school tax itself it follows the school year not a fiscal year where the county tax follows a regular 12-month calendar it's easy to plug in those numbers and adjust how many days are left in the calendar year the school tax runs from July 1st to June 30th so in this time of year you're dealing with only 12 days of adjustments as a credit to the seller and then a hundred and twenty some odd days for the county tax through the end of the the rest of the or one hundred ninety days I'm sorry so you really do have to pay attention to that title report when you get it to try to fill in the blanks and I see a lot of mistakes that are made that have to fumble through the paperwork at the closing table trying to make the necessary adjustments when it comes down to the county and school taxes because if you're doing saratoga closing Saratoga County closings they maybe deal a little bit different than Schenectady County closings so just something to think about when you're putting the the statement of sale together before the closing and ready to present it to your client you want to be as accurate as possible as far as the numbers concerned I know from my point of view I went to law school because I wasn't a math person I'm doing real estate so I see numbers all the time now so it's been counterintuitive but you get used to it trying to pick out the right numbers to go in the right places but if you have a great paralegal like I do they can also be a benefit to trying to plug those different things in there so that's one of the first things I would talk about is that the county and school taxes and how to adjust those as far as getting your closing statement together another item believe it or not that causes a lot of commotion is the water and fuel readings more often than not when we're getting the numbers together for a client these are the last figures to be placed in the closing statement for a variety of reasons people don't have fuel adjustments all the time not a lot of people have propane tanks to heat their homes or to fuel their homes or oil tanks so a lot of times people forget to make sure that those readings are taken care of ahead of time so as the attorney you show up to the closing table somebody asks you about any fuel adjustments and you're left holding the bag trying to figure that out but it's a small figure it's usually we can't be called in and done and adjusted for within 48 hours but that's one of the few items that does cause a last-minute hiccup along the way if it's not done properly the same thing goes for the water adjustment the numbers that have to be called in usually you can do it three or four days in advance sometimes I lean on the Realtors to help me out and get that taken care of and the biggest thing is explaining that to the purchaser when they receive the credit so the bills not due for another couple of months the closing happens today the purchaser is going to get a credit for that water reading and it could be 50 or $60 for usage that the seller is already taken care of up until that closing so there's a period of time the sellers use the water the bill hasn't come out yet believe it or not I'll get a call after call after the closing about $50 that I'm being charged for why am I being charged for the sellers water usage I remind them they got a credit for it on the statement of sale it was adjusted for at the closing so $50 or $100 on a 300 or $200,000 purchase causes the most commotion all the time and surprisingly I try to bring that up and I'll still get a phone call tomorrow on the closing I did this afternoon for that very same reason but those are some of the the two adjustments that that take place the other thing that people have trouble with are real estate Commission's making sure that they're on the statement of sale and trying to make sure if you're representing the seller that everything that they had agreed to as part of their listing agreement is accurate really accurately reflected on the statement of sale so what you want to do is talk to your realtor ahead of time make sure they get your katare Commission statements to you ahead of time you can adjust for them at the closing and you want to make sure you talk to your client to figure out it's supposed to be a 5% Commission how is it supposed to be split with the Colebrook Commission so it could be a 6% or 5% Commission split evenly I've seen it 3% 2% or 4% 2% but you want to make sure your client understands exactly how they're required to pay their realtor at the closing table and a lot of times they don't know it is restated in the purchase contract and one of the standard Capital Region Multiple Listing agreements it's in there it should be stated there but you should also check with your client to be sure that that is the that is in fact the right amount I see I haven't flipped any of the the slides here the next thing to talk about is title insurance cost does everybody have a basic understanding of what title insurance is yes sir well believe it or believe it or not it depends on first of all what time of the tax year and if the taxes have been paid so if the sellers already paid the tax they're gonna get the credit for the payment now do determining how it falls on which day if there's an extra day involved it depends on the attorney and on a case by case basis usually we look at our numbers and we figure out if it's closing before noon you probably don't get the benefit of that extra day if it's closing in the afternoon a lot of times it's just included by just common courtesy in practice so it really it really isn't now it's just practice in the area in which you practice in so common practice and courtesy between the attorneys usually figures those things out yes normally what's gonna happen is you're gonna take an estimate of what that cost could be to two ways one you're gonna take an estimate of what the cost is going to be or the other way is to use last year's taxes more than likely it's going to be a bill held by the title company in escrow until that be until that becomes do and then the credits going to go to the purchaser so let's say for example the last year 2011 the school tax for that house was $2,000 and we're closing in July after this one's already been paid waiting for the new bill title company's gonna hold it could be 20% or 25% in escrow so based upon last year's taxes you're going to assume that that bill is going to be paid by the purchaser in September October the purchaser is going to get the credit on that section of the statement of sale that's on page 4 are on page 5 and then you're going to adjust for it that way and they're also going to it's going to come out of the purchasers proceeds to pay that tax bill being held by the escrow company until it tells September October when that bill actually becomes due that makes sense that was a long-winded answer to a very complicated question right based on usually when the escrow company holds it for 25% above that $2,000 amount i luckily haven't seen the taxes fluckey fluctuate that much it might go up three or four percent and the remaining bounce goes back to the purchaser because it came out of their proceeds good point so the other thing that it causes a little bit of complication its title insurance first of all I asked the question did anybody deal with title insurance or understand the the basics of title insurance depending upon who you ask and what role they play in the closing process they may have a difference of opinion on what it's all about it's only good if you need it some people would say some people would say you can never be over and sure it's not a bad thing to have regardless if it's a finance closing by a banking of banking lender you're going to have to pay what's called a mortgage policy within that mortgage policy their search fees premiums endorsements those types of those types of costs that the purchaser is going to have to bear with one caveat if you're in Schenectady County they still go by the old school version where the seller is going to pick up the search fee as part of that title insurance cost on behalf of the purchaser the purchaser is just going to be responsible for any premiums endorsements that go along with that overall cost but what is title insurance and what is it necessary for it's basically to protect against future defects in title that may not have been picked up in the current search that was done prior to the closing that you're all attending there could be judgments liens that sort of thing that are not picked up that were missed filed title insurance would protect the bank up to the full amount of their mortgage and then if the purchaser buys an owners policy of title insurance it would protect them up to the amount of the purchase price so that's why you see that there and it's a it's one of those things that you want to bring up at the outset because to us ways your clients concerns about what it's used for why do they have to pick up the tab the bank well it's a requirement of your loan you're not gonna get the money unless you have a mortgage policy in place for your bank and to let them know what the owners title insurance is all about if you don't recommend owners title insurance and they've never heard about it and something comes up after the closing that affects their title to the property you could be on the hook for a wonderful malpractice claim if you've never mentioned owners policy of title insurance that's why at every closing the title agent is going to hand over an affidavit that says we all gave this purchaser the opportunity to buy owners title policy an owner's title policy and they refused or they bought it and there's other things that go along with it but I always bring it up at the outset even when I first introduced myself to the client because it's an added cost at the closing of to pick up the tab for an owner's title policy its they've heard difference of opinions so it's trying to to lay the groundwork for when the closing actually occurs what goes on as far as title insurance is concerned yes sir correct I notify it and I say it's I say the reasons that are good bad or indifferent to get it I don't tell them it's a business decision on their part I say that the percentage of the people that do get it I don't necessarily like to say I recommend that they get it because I don't want to be tied to a relationship with the title insurance agent and then you get into all those other wonderful questions but it's a fine line but you definitely have to offer it to them you don't necessarily have to recommend that they get it I see more and more now that there's foreclosures going on bankruptcies those are the riskier propositions that come out there 20 years ago in upstate New York it's maybe one out of a thousand closings very small very small downstate New York City nobody leaves the closing table without it they not only do they offer it they recommend it and they force you pretty much to get it because it's just like the wild wild west with the clerks and how things are filed down there and handled and you can imagine with all the properties in one small defined area the different types of issues that would arise but upstate fewer and fewer issues but more and more prevalent nowadays with the the mortgage crisis that we just have been going through right now an issue that could pop up or where I would recommend when I go through the the owners policy why somebody should or should not get it I tell them there are some risky propositions one there was a bankruptcy close in time with either the current owner or previous owner because some of the judgments that follow that bankruptcy may not have been filed correctly so you run into some issues where Mis files on a property comes up later on as the current homeowner they could be responsible for that anything with a trust in a state where you have to have notification requirements to heirs some heirs may have been missed there may have been adopted children that weren't notified we have no way of knowing that but for a small price this will protect you in that event those are the two main areas and if it's a if you're putting down a huge amount of equity into the home it's a cash deal or you're putting over forty percent twenty percent different schools of thought on that but if you're putting a huge amount of equity and small cost of title insurance can get you a significant peace of mind after the closing for those types of scenarios sure that's the the title insurance aspect of it but I could spend probably a day and a half teaching a course on title insurance alone for the reasons we just went over it's a interesting topic there's different schools of thought on it but it's good to bring your client on board early on to try to figure out where they what questions they may have they may not know anything about it or they may have an opinion about it it's good to talk about it at the outset especially since it'll be an additional cost to them as far as picking up their owners policy next thing that causes some commotion at the closing table that I see on a daily basis is dealing with mortgage tax and transfer tax and deed stamps mortgage tax I guess I'll preface it everything mortgage tax and transfer tax New York State get you coming and going if you're taking out a mortgage you're gonna pay tax on it if you're selling the property you're gonna pay tax on that in some way shape or form with the mortgage tax that's the buyers responsibility and again depending upon where you live where the property is located you're gonna pay a differing amount of the tax usually it's 1% of the mortgage amount and it's split between the lender and the purchaser 7525 usually 75 person or point seven-five to the purchaser 0.25 to the lender and that's paid at the closing table as part of the as part of the process as far as the transfer tax you file a form the TP 584 you pay five dollars to do that there's a four page form at the in the back that goes through it that the purchaser and seller signed verifying the purchase price so if you have $100,000 property it's $4 for every thousand in the purchase price so you're paying $4 or $400 tax on that transfer responsibility on the seller but yeah they get you coming and going but that's the cost of doing business in in New York State the other things again are all fact dependent upon where you are how many pages in the deed that's gonna cost you a little bit more usually the standard documents two or three pages so municipalities have a forty five dollar cover page fee these are just easy things to miss if you're not used to the municipality that you're closing in recording the mortgage same thing it's a per page fee five dollars plus a forty five dollar filing fee for the document alone same thing for powers of attorney used to be a two or three page power of attorney now we use the standard New York State form it's six pages so that costs doubled from fifteen dollars to file to now it could be sixty dollars to file so there's all these different recording fees that you have to be aware of your client has to be aware of there's a closing tomorrow that I'm going to borrowers are strapped for cash and every little detail that they're not expecting when they get the clothing that they weren't expecting and we'll talk about it that wasn't disclosed to them on their Good Faith Estimate it's going to upset the applecart quite a bit they you have sellers that are bringing money to closing these days you have purchasers bringing as much as they possibly can to a closing which again is a whole other topic that we can get into but all these little things add up and if we're not aware of it ahead of time we don't do the calculations correctly because we're not used to the county that we're closing in that could cause 50 to $100 difference which to you and me might be something but to the borrower to the seller might mean a whole other whole other thing so just some just some food for thought on the little things there to be aware of now the next item this one is the hud-1 settlement statement and you can find it in the back y it's a three-page document and it's right after the statement of sale that we we showed earlier on believe it or not this form has been revised in the last couple of years and I in my personal opinion it's gone from bad to worse the government tried to get involved a federal government try to get involved and want to make a document that was complicated to begin with the alittle bit more clear and understanding as far as the borrow is concerned and I just don't think it does it does it right by the bar where I think it just lends to the confusion before simple document and I tell my clients all the time listen here's my statement to see how that first forum we went over look at this one this one has all the numbers between you and the seller now we're going to see the document that has all the bank's numbers as well and so you you have borrowers numbers the sellers numbers the bank's numbers numbers that the borrower saw on their Good Faith Estimate and their Reedus closed on this form and then you get to page three of that document itself the very last page where they have to sign here's your good faith estimate again here's how well the bank did an estimating those costs so there's a lot of stuff going on and for somebody that's done it for the last nine 10 years it's one thing even I when when this came out extremely confusing not only to set it up when we represent the bank ourselves but trying to explain it to our client I mean they want to know what's the bottom line and then you throw a three page document with I don't know how many numbers can be on here all at once but it seems like it goes on and on they tried to do the right thing and making it clear to the borrower Andry disclosing the information because a lot of this information was just done at the beginning of the application process when you first applied you get the Good Faith Estimate there'd be that APR on there again we'll talk about that at the later portion of the program and then they maybe not see it they'd sign a form at the closing so now you see it in the beginning of the application process you see it when you've been approved for the loan and then you're gonna see it again all these numbers at the at the closing table when you sign the hud-1 settlement statement so I guess if you disclose it enough it kind of forecloses the idea that somebody can complain they didn't see the number I mean they've seen it three or four times by the time you get to the closing table but the problem is everybody or maybe all of us have been through a closing even on our own purchases you're at the closing table you're signing everything you're listening to your attorney the other attorneys going and now they're Reedus closing these numbers I don't know how much of this is actually sinking in at that point probably not a lot so you're still losing out on the important information but the biggest thing that you want to point to on all of this you've already gone over the numbers the majority of them on your statement of sale this one is just to give you confidence before you start signing the next document we're going to talk about if you look at page 3 where it says loan terms it goes through and itemizes everything maybe for the first time for your borrower what the initial loan amount is what they've agreed to hopefully they've seen that with their commitment letter how many years what the initial interest rate is but if this is filled in correctly everything else your client is signing at the closing table if you're representing the borrower is going to play off those numbers so you're going to have the initial loan amount number of years the interest rate whether there's a balloon payment whether it prepayment penalties so when I sit down to a closing I immediately pull out this HUD one check with my client hey you're getting a 4% interest rate here's your principal and interest it includes mortgage insurance these are the general terms about your loan does this sound right if they haven't fallen out of their chair I think we're okay to continue with a closing but believe it or not a lot of times there's surprises the bank hasn't told them exactly what their loan terms were they weren't expecting the PMI to be in there the mortgage insurance and so their payment therefore is a little bit higher which also talks about the the escrow amounts in there if they weren't expecting the increased taxes on a property that may have just occurred recently so the interest or the taxes that you're paying into the escrow account as part of your mortgage payment may have changed recently because of the increase in taxes that may throw off their mortgage payment on a monthly basis and be a complete surprise for your borrower so hud-1 settlement statement it's been it's been revised I don't necessarily think it's it's new and improved but there's a lot of terms in there that you need to familiarize yourselves with in order to present it to your client in a coherent fashion any questions on the hud-1 settlement statement sure you there's a number of forms that are taken care of by the bank attorney the hud-1 settlement statement is the one that's taken care of by the bank attorney usually to formulate that form your statement of sale is taken care of you can you do your statement of sale for the borrower the sellers do their statement of sale combine it to get the hud-1 settlement statement and then there's a division of who's responsible for what the one form that you file as far as the transfer tax is concerned is a sellers responsibility there's another form that's a borrower's responsibility but usually talk to the other attorney they'll let you know who's responsible for what just so there's no miscommunication usually a lot of these forms are found online anyways so if you forget one or you don't prepare it ahead of time a lot of this can be done at the closing table except for the closed statements those are the most important things that you'll prepare ahead of time if you represent the borrower or if you represent the seller or you should all have your own statement of sale but normally you talk to each other beforehand make sure your numbers are on the same page so your adjustments are correct and all your fees are correct and then you can get to a similar bottom line by the time you get to the closing table but everybody does they all have their own responsibilities not just one attorney so another hand up most of these forms including the most of these forms that we go over today can be forms online the government the state government as far as the TP 584 the one where the sellers transfer tax is is mentioned that's a form downloadable from the state website there is one form that you have to order I don't think we've talked about it yet we're getting to it on the next slide the ene form the 5217 which tells the assessor's office that a transfer is taking place that one actually it's been improved over the years but it's still in triplicate believe it or not so you have to order it have them those forms shipped to your office so if you're the purchasers attorney you can have that ready to go at the closing but those are free of charge they'll be just be sent to your office and taken care of everything else if you're a purchaser or a seller's attorney all the other forms that we talked about for the most part are handled by the lending attorney and they'll bring those to you to a closing but the ones for purchasers and sellers attorneys those are normally can be found online the yep the TP 584 is a PDF document that you can fill in right online and then print it out the ene form the RPE 52:17 let's see here might be on a different the RP 50 to 17 that tells you the assessor's office that it transfer took place and what parcel properties being transferred that's the one that's in triplicate you'll have to handwrite it you can type it out too if you have an old-fashioned typewriter but it's not a fillable form well hey nope not a prop yep hey I got one too got one too for all these different forms it's easier to do it that way for sure the next thing that I wanted to hit on that people don't realize school tax relief forms everybody is eligible for school tax relief it's free money from the government so anytime you're purchasing a primary residence your client is eligible and then there's enhanced Starr hopefully everybody's aware of these different programs that are out there even just on your own residence make sure these are in place because anytime the government is handing out reduce taxes sign them sign me up there's a form online that you can download even if you just google it it's on its online New York State star form it's a fillable PDF form you can do on your computer there's also enhanced star depending upon your age and income level and then if you're a veteran depending upon your type of service you also be eligible for significant tax benefits through the star program that's only on your school taxes but it's a for my handout at every closing anytime I'm doing a purchase closing I hand it to my client with a copy of the deed and make them aware that that form has to be filled out and submitted to the assessor's office with the school district by March 1st of the next fiscal year if it's not done you're going to have the most tax you can possibly pay at be part of your escrow payment if you're financing it or be part of your school tax liability each and every year so the sooner you get it done a-tellin go right after the closing sign up for it take care of it right away that way they'll be eligible and believe it or not your bank if you're financing the home loan the bank automatically assumes you're not going to apply for the star so they base your escrow payment for your school tax responsibility on the higher rate so as soon as you apply for the star you notify your bank escrow agent so they can reduce that and then you're also going to obviously notify the school finance department that you're eligible for the star so you get that reduction right away so it's free money out there anybody that has a primary residence is is eligible for it so definitely sign up as soon as you can so those are the main non lending non bank documents that I talked about as part of the closing to be aware of before you even get there so so you get to the closing and then one of the things you want to do right off the bat is take your statement of sale that you've drafted ahead of time compared to the HUD usually ahead of time you've done this with a bank's attorney making sure that your costs are on there the sellers costs are on there check the contract a lot of time there's in the contract there's a sellers contribution sellers sellers concession that you want to make sure that's included if you're representing the borrower they get a obviously a reduction on what they owe the seller compare your version to the bank's version and usually if everything's done right everybody agrees to the penny and you move right along but that's one of the things as soon as you get to the closing table you want to you want to take care of so you've gone to the closing you've gone through everything some of the things you want to think of after the closing that pop up I know it might be small to read up there but it's in the materials escrow for repairs if there was any agreements made ahead of time that haven't been documented on your statement of sale there's credits to be given for repairs that need to be taken care of if the seller is going to be occupying the property for a couple of days after the closing make sure that agreements taking care of those types of things do pop up on occasion you want to make sure those are honored out well in advance and also get as many copies as possible my office we scan everything in to make it convenient it's always good to have a copy of all the checks pay off letters deeds etc because when your client if you're representing the purchaser and they go to sell down the road sale down the road and there's a document that's missing that they need for their closing somebody should have it we're required to keep our documents in place for quite a period of time so we should always have something from the purchase on hand I don't know how many times I've gone to a closing on the sale and the satisfaction of the buyers previous mortgage hasn't been taken care of so if you have the copy of the check that took care of that pay off or the actual satisfaction document on hand that always can clear up a title issue right away important bank documents and a number of these are going to be in the back of your materials as well the note in the mortgage if you have done a closing in the last few days or in the last few years little has changed about the note in the mortgage you just want to make sure that they match up to the terms that we went over on that hud-1 settlement statement there's the loan the terms of the loan how much the borrower is taking out the interest rate and when the first payment is due you want to check on the note it's the IOU to the bank they've agreed to loan you a certain amount of money you agree to repay it it's going to stay in place and if you default that makes you personally liable to the bank for any difference if they go to foreclose on the mortgage that you've signed and there's a difference the sale price and what you owe in the loan that note is going to hold you personally liable now the mortgage I tell my clients there's four things you need to know about the mortgage and there's only four things because as I've stated before if you want the money you have to sign it we can't change the language of the mortgage that the bank is giving you as long as you pay your principal and interest on time to the bank every month you pay your taxes on time you keep your property insured and you take care of the property you're completing the four requirements under that mortgage to make sure you can stay there without the bank ever giving you a problem the minute you miss one of those four requirements nothing in that mortgage can help you out of that situation I tell my clients that at every closing they seem to understand it and that gets them to page 10 awfully quick because again the bank takes 10 sometimes 16 pages to let them know that they can't store old tires on the property or hazardous waste and if they do that's a default banks in the mortgage say they can come and inspect the property make sure you're taking care of it they never do but nothing in that document favors the borrower except a small paragraph that says as soon as you pay the bank off we'll give you a satisfaction a mortgage and a reasonable amount of time that's it everything else favors the bank in the event you default so those are that's the note in the mortgage and again standard uniform instruments you'll see at the bottom of each of those documents and the handout and that any closing that you go to so nothing really changed except the borrower the property that's being mortgaged the amount of the loan and the bank that's doing the lending one of the biggest documents at the closing that the Bank hands out that causes a lot of confusion is the Good Faith Estimate and the reason behind that and if you look at the document that if there's one in the handout here it's part of the loan application that's in there the 1003 the problem with the Good Faith Estimate is the confusion regarding the annual percentage rate there's the first box that you'll see on the Good Faith Estimate it's an artificially inflated percentage rate that takes into consideration the closing costs associated with the loan you'll get to a closing and your client will say well I'm expecting a 4% interest rate you'll go through the documents the note says that the mortgage reference is it the hud-1 settlement references it and get to the good faith estimate and the first box that they see on this good faith estimate says it the the APR is 4.91 and that the borrower is going to look at me and say well geez I thought I was getting 4% and I try to calm them down and let them know this is a totally different rate it's artificially inflated so to speak based upon the amount of closing costs that are going into the loan today the closer that number the APR is to your interest rate the better the less amount of garbage costs that have gone into your loan it's good at the beginning of the process not so much of the the closing table because if you're closing with trust go bank today and they have 4.91 as your APR in the beginning the process you could take your trust go APR and go to HSBC well First Niagara now many of the other local banks and say listen I want to take out this loan amount what's your APR compared to what I have at trust go and you can do with the comparison little does the everyday consumer know or why that APR is there it's for shopping comparisons that's the best way I can I can put it it's the most confusing part of the Good Faith Estimate especially when you're at the closing table going through the documents your client expects to get a four percent interest rate and they're staring at a four point nine one APR taught lead if ur n't but what it does this show you how much money is going towards closing costs how much money is going towards the actual purchase of the home what you're rolling into the loan and then they generate based upon that an artificial an annual percentage rate but causes a lot of confusion if you're able to explain that to your client in a coherent fashion good for you that's it's kudos to you because I've had accountants as clients that don't understand it anybody that deals with numbers every day it's not the most easy thing to do when you're trying to get through the the Good Faith Estimate explanation one of the last few items that we'll talk about is the 1003 that one is in your materials as well the 1003 is a code term with the bank for the Uniform residential loan application again it's at the closing table you have to resign it every borrower has to sign it for a number of reasons basically there's two reasons one they understand that if there's a code bar where they're applying for joint credit so if one person defaults in essence they're both are defaulting and they're responsible for making up any of the obligations with the note and then second of all the bank has you sign Rhys ein the loan application at the closing to make sure that you haven't overstated your assets or understated your liabilities but it's information they've collected at the very beginning of the application process so a lot of the information that you see within the document especially on pages 2 & 3 where they talk about your assets and liabilities a lot of times that those things have changed people have paid off their credit cards or they've come into a sum of money and inheritance or something of that nature within the interim as long as you haven't overstated your assets you've made a misrepresentation on those numbers when you're first applying as long as your client hasn't misrepresented to the bank in any of those fashions they're okay to sign it but again a lot of times I'll be going through this hey my home phone numbers not correct or G's they have my old address on they're not the most important pieces of information you want to be as accurate as possible when going through this but the thing that they're keying in on is making sure that you had that $40,000 in the bank that you can afford this new loan and you haven't purchased any second or third homes in the interim that would throw off their evaluation of the loan process but it's a full again it has a lot of information in it if you're not familiar with it on a daily basis it can certainly throw you off take a few minutes to flip through it before you do a closing and you can understand why the informations in there it's a background information that they took down when they first applied credit report history the assets and liabilities of your client so they can do a good evaluation of what goes into the overall approval of this loan application so it's signed in a number of places and submitted as part of the loan closing package you
