CHCP Settlement Statement Preparation 3 — Questions and Answers
Question 1: Under TRID, how many business days before consummation must a buyer generally receive the Closing Disclosure?
- 1 business day
- 2 business days
- 3 business days (Correct answer)
- 5 business days
Correct answer: 3 business days
TRID requires lenders to deliver the Closing Disclosure to the borrower at least three business days before consummation of the loan.
Question 2: Which of the following is typically a buyer's debit on the settlement statement?
- Loan payoff
- Sales price (Correct answer)
- Earnest money deposit
- Broker commission
Correct answer: Sales price
The sales price is a debit to the buyer because it represents an obligation the buyer must pay to purchase the property.
Question 3: Recording fees for the deed are customarily charged to which party on the settlement statement?
- The lender
- The buyer (Correct answer)
- The title company
- The seller
Correct answer: The buyer
Recording fees for the new deed are customarily a buyer's expense because the buyer benefits from having the deed recorded in their name.
Question 4: A buyer is purchasing a home for $400,000 with a 20% down payment. What is the loan amount that would appear on the settlement statement?
- $80,000
- $320,000 (Correct answer)
- $400,000
- $380,000
Correct answer: $320,000
20% of $400,000 is $80,000 (down payment), so the loan amount is $400,000 − $80,000 = $320,000.
Question 5: Which settlement statement line item represents interest charged on the loan from the closing date to the end of the first partial month?
- PMI reserve
- Prepaid interest (Correct answer)
- Origination charge
- Daily interest adjustment
Correct answer: Prepaid interest
Prepaid interest covers the per-diem interest from the consummation date through the last day of the month, before the first full monthly payment begins.
Question 6: On a settlement statement, the seller's existing mortgage balance being paid off at closing is listed as:
- A credit to the seller
- A debit to the buyer
- A debit to the seller (Correct answer)
- A credit to both parties
Correct answer: A debit to the seller
The seller's existing loan payoff reduces the seller's net proceeds, so it is a debit on the seller's side of the settlement statement.
Question 7: When completing a settlement statement, which of the following correctly describes 'prorated rents'?
- A debit to both buyer and seller
- A credit to the buyer and a debit to the seller (Correct answer)
- A debit to the buyer and a credit to the seller
- A credit to both buyer and seller
Correct answer: A credit to the buyer and a debit to the seller
When the seller has collected rent for a period beyond closing, the excess is credited to the buyer (who will own the property) and debited to the seller.
CHCP Settlement Statement Preparation 3
Under TRID, how many business days before consummation must a buyer generally receive the Closing Disclosure?