A borrower is closing on a home on April 14. The estimated annual property taxes are $3,883.33. What amount should show on his HUD-1?

To determine the correct amount that should show on the HUD-1, it’s important to understand how property taxes are prorated at closing. In this case, the estimated annual property taxes are $3,883.33, which translates to approximately $323.61 per month ($3,883.33 divided by 12 months).

Since the borrower is closing on April 14, the property taxes for the year would need to be prorated from the start of the year until the closing date. The period from January 1 to April 14 consists of 104 days.

To calculate the daily tax amount, divide the annual taxes by 365 days:

$3,883.33 / 365 ≈ $10.64 per day.

Next, you would calculate the total taxes due from January 1 to April 14:

$10.64 per day multiplied by 104 days gives approximately $1,107.23.

Since the borrower will be responsible for property taxes from the date of closing onward, the seller would have prepaid these taxes for the portion of the year leading up to the closing date. Therefore, the tax credit that should be provided to the borrower in this scenario reflects the prepaid amount that benefits the seller