4. On August 20, Mr. and Mrs. Cleaver decided to buy a property from Mr. and Mrs. Ward for $105,000. On August 30, Mr. and Mrs. Cleaver obtained a loan commitment from OKAY National Bank for an $84,000 conventional loan at 5 percent for 30 years. The lender informs Mr. and Mrs. Cleaver that a $2,100 loan origination fee will be required to obtain the loan. The loan closing is to take place September 22. In addition, escrow accounts will be required for all prorated property taxes and hazard insurance; however, no mortgage insurance is necessary. The buyer will also pay a full year's premium for hazard insurance to Rock of Gibraltar Insurance Company. A breakdown of expected settlement costs, provided by OKAY National Bank when Mr. and Mrs. Cleaver inspect the uniform settlement statement as required under RESPA on September 21, is as follows: I. Transactions between buyer-borrower and third parties: a. Recording fees--mortgage b. Real estate transfer tax c. Recording fees/document prep. $30.00 225.00 200.00 d. Hazard insurance-one-year policy-Rock of Gibraltar Ins. Co. 420.00 e. Peggy Prudent-attorney 150.00 f. Inspections 50.00 400.00 125.00 g. Title insurance fee (Landco Title Co.) h. Landco Title Co.-closing fee II. Transactions between seller and third parties: a. Release statement-seller's mortgage b. Payoff seller's mortgage (Home State Bank) c. Real estate brokerage fee (6% Fast Deal Realty) III. Buyer-borrower and lender information: a. Amount of loan b. Prepaid interest is owed from closing through September 30, which equals nine days (inclusive). Regular payments to begin on November 1. [.05 x 84,000) + 365] × 9 c. Property tax escrow-two months required d. Loan origination fee IV. Buyer and seller information: a. Purchase price b. Deposit paid by Cleaver to Ward (paid in escrow to OKAY National Bank) c. Real estate tax proration (taxes for the current year to be paid in arrears by BUYER to county next January 1: $800 per year). Therefore, because the SELLER will own the property from January 1 to September 22, or 264 days. Therefore, the Buyer owes for the 101 days prior to closing and transfer of title. Therefore, a credit for part of the $800-per-year real estate tax (for 264 days) is due to buyer from seller at closing. Required: a. What are the amounts due from the borrower and due to the seller at closing? 5.00 32,715.00 6,300.00 $ 84,000.00 103.56 133.33 2,100.00 $105,000.00 1,500.00 $578.63 b. What would be the disclosed annual percentage rate as required under the Truth-in-Lending Act? c. When will the first regular monthly mortgage payment be due from the borrower?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
icon
Related questions
Question
100%
4. On August 20, Mr. and Mrs. Cleaver decided to buy a property from Mr. and Mrs. Ward for
$105,000. On August 30, Mr. and Mrs. Cleaver obtained a loan commitment from OKAY
National Bank for an $84,000 conventional loan at 5 percent for 30 years. The lender informs
Mr. and Mrs. Cleaver that a $2,100 loan origination fee will be required to obtain the loan. The
loan closing is to take place September 22. In addition, escrow accounts will be required for all
prorated property taxes and hazard insurance; however, no mortgage insurance is necessary. The
buyer will also pay a full year's premium for hazard insurance to Rock of Gibraltar Insurance
Company. A breakdown of expected settlement costs, provided by OKAY National Bank when
Mr. and Mrs. Cleaver inspect the uniform settlement statement as required under RESPA on
September 21, is as follows:
I. Transactions between buyer-borrower and third parties:
a. Recording fees--mortgage
b. Real estate transfer tax
c. Recording fees/document prep.
$30.00
225.00
200.00
d. Hazard insurance-one-year policy-Rock of Gibraltar Ins. Co.
420.00
e. Peggy Prudent-attorney
150.00
f. Inspections
50.00
400.00
125.00
g. Title insurance fee (Landco Title Co.)
h. Landco Title Co.-closing fee
II. Transactions between seller and third parties:
a. Release statement-seller's mortgage
b. Payoff seller's mortgage (Home State Bank)
c. Real estate brokerage fee (6% Fast Deal Realty)
III. Buyer-borrower and lender information:
a. Amount of loan
b. Prepaid interest is owed from closing through September 30,
which equals nine days (inclusive). Regular payments to begin on
November 1. [.05 x 84,000) + 365] × 9
c. Property tax escrow-two months required
d. Loan origination fee
IV. Buyer and seller information:
a. Purchase price
b. Deposit paid by Cleaver to Ward (paid in escrow to OKAY National Bank)
c. Real estate tax proration (taxes for the current year to be paid in arrears
by BUYER to county next January 1: $800 per year). Therefore, because
the SELLER will own the property from January 1 to September 22, or 264
days. Therefore, the Buyer owes for the 101 days prior to closing and transfer
of title. Therefore, a credit for part of the $800-per-year real estate tax
(for 264 days) is due to buyer from seller at closing.
Required:
a. What are the amounts due from the borrower and due to the seller at closing?
5.00
32,715.00
6,300.00
$ 84,000.00
103.56
133.33
2,100.00
$105,000.00
1,500.00
$578.63
b. What would be the disclosed annual percentage rate as required under the Truth-in-Lending Act?
c. When will the first regular monthly mortgage payment be due from the borrower?
Transcribed Image Text:4. On August 20, Mr. and Mrs. Cleaver decided to buy a property from Mr. and Mrs. Ward for $105,000. On August 30, Mr. and Mrs. Cleaver obtained a loan commitment from OKAY National Bank for an $84,000 conventional loan at 5 percent for 30 years. The lender informs Mr. and Mrs. Cleaver that a $2,100 loan origination fee will be required to obtain the loan. The loan closing is to take place September 22. In addition, escrow accounts will be required for all prorated property taxes and hazard insurance; however, no mortgage insurance is necessary. The buyer will also pay a full year's premium for hazard insurance to Rock of Gibraltar Insurance Company. A breakdown of expected settlement costs, provided by OKAY National Bank when Mr. and Mrs. Cleaver inspect the uniform settlement statement as required under RESPA on September 21, is as follows: I. Transactions between buyer-borrower and third parties: a. Recording fees--mortgage b. Real estate transfer tax c. Recording fees/document prep. $30.00 225.00 200.00 d. Hazard insurance-one-year policy-Rock of Gibraltar Ins. Co. 420.00 e. Peggy Prudent-attorney 150.00 f. Inspections 50.00 400.00 125.00 g. Title insurance fee (Landco Title Co.) h. Landco Title Co.-closing fee II. Transactions between seller and third parties: a. Release statement-seller's mortgage b. Payoff seller's mortgage (Home State Bank) c. Real estate brokerage fee (6% Fast Deal Realty) III. Buyer-borrower and lender information: a. Amount of loan b. Prepaid interest is owed from closing through September 30, which equals nine days (inclusive). Regular payments to begin on November 1. [.05 x 84,000) + 365] × 9 c. Property tax escrow-two months required d. Loan origination fee IV. Buyer and seller information: a. Purchase price b. Deposit paid by Cleaver to Ward (paid in escrow to OKAY National Bank) c. Real estate tax proration (taxes for the current year to be paid in arrears by BUYER to county next January 1: $800 per year). Therefore, because the SELLER will own the property from January 1 to September 22, or 264 days. Therefore, the Buyer owes for the 101 days prior to closing and transfer of title. Therefore, a credit for part of the $800-per-year real estate tax (for 264 days) is due to buyer from seller at closing. Required: a. What are the amounts due from the borrower and due to the seller at closing? 5.00 32,715.00 6,300.00 $ 84,000.00 103.56 133.33 2,100.00 $105,000.00 1,500.00 $578.63 b. What would be the disclosed annual percentage rate as required under the Truth-in-Lending Act? c. When will the first regular monthly mortgage payment be due from the borrower?
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education