Loans, Mortgage documentation

[Jason Rennie]

lapham at extracta.com.br said:
> The part I'm most interested in comments about is the mortgage part,
> since I have no idea if it is setup correctly.  (are there other fees
> besides closing costs?  How are closing costs calculated?) 

It's probably best to work with "closing costs" as a black box as you've
done.  The average home user probably won't care to break down all the
little expenses individually.

There are, however, a few items, "prepaids," that probably should be
broken down.  The borrower always pays "prepaid interest" at closing,
which is interest on the loan from the date of closing (or a few days
after, depending on the jurisdiction) to the end of the month.  This
should be filed as a mortgage interest expense.  If the loan is more than
80% of the value of the house, the borrower must usually escrow real
estate taxes, and PMI (mortgage insurance), if applicable.  The tax escrow
is usually around 1/4 of the yearly tax bill (e.g. 1/4 of $3000) and the
PMI escrow is usually 2 months worth (e.g. 1/6 of 0.75% of the value of
the home).  The examples are ball-park numbers from my personal
experiences.  The escrows are, of course, assets, though quite viscous
ones. :)

Also, I'd recommend that you do a monthly payment to show the parts of 
the payment going to principal, interest and (if necessary) escrow and 
PMI.

Oh, and "points" would be a good thing to discuss as many mortgages come
with them.  One point is an extra 1% of the loan size that is paid to the
lender.  I don't know how points are classified in terms of expense
(whether they classify as mortgage interest).

Jason