New home purchase - confused how to enter settlement statement totals

Jackson25

Hello,

I've used Quicken for about the last 10 years for the simple bank statement downloaded transactions. But now, this is the first time I've had a home purchase with a mortgage, and I'm trying to correctly input the amounts of all the transfers for down payments, escrow payments, etc., and all the other stuff that showed up on the settlement sheet.

Also, subtracting these amounts seem to wreak havoc on my expense/income graph - it's showing $70K as an expense?? Is that correct?

Gosh - how do I add those into Quicken?? Can't I just add those in one lump sum somehow coming from my bank account? Is there some FAQ or tutorial that would show some learning of this?

Thanks for any help you can provide!

Frankx

Hi @Jackson25,

First - congratulations on the purchase of your home!  I agree that entering such a transaction (with so many different moving parts) can be a daunting task.  I suggest that you review the guidance located here as a first step - LINK.

It should provide enough information to cover the main points.  If you have any questions that are not covered, feel free to post back here and we'll help you with those specific questions.

Also - on the $70K "expense" transaction - while it is possible that current expenses may result from a home purchase, most of the costs of a home purchase will actually be part of the "asset" or "property" account, so you may actually need to correct parts of the entries you already made.  In fact, it might be easier if you delete entries that you've already made and start fresh by follow the above referenced guidance.

Let me know how that goes and if you have any followups.

Frankx

Tom Young

Google "HUD-1 which costs are included in capitalized cost of house" and you'll get lots of information about how to read your settlement statement and what gets capitalized as the basis of the house vs. what gets expensed.  (NOTE though, the tax rules for what's a deductible expense, what costs get capitalized and amortized, and what costs get capitalized into the house's cost basis are different depending on if the house is a primary residence or a rental house.)

Without getting too deep into the weeds here the cost of your house to you should be pretty close to the sum of the money you pulled out of your pocket when you made your offer, ("earnest money"), the money you pulled out of your pocket for the down payment, and the liability you took on with the mortgage.  That should be "fairly close" to the selling price of the house and you might figure that's "close enough."

If you're looking for more precision then you will have to pull apart the settlement statement a bit.  If part of your closing cost was a refund to the seller of prepaid property taxes, then that's a deductible expense that you probably would not include in the cost of the house.  If you paid "points" to secure your mortgage then that's another deductible expense that you'd probably want to exclude from the house cost and line out as a form of expense. 

As to your "Is that correct?" question, that $70K is, in the main, NOT an expense, it part of your house's cost.

Jackson25

Great, thank you both SO much! I'll dive in and see how far I get :)