How to create new mortgage account Including Earnest $$ + Deposit, etc.

How do I enter transactions related to buying a new home, including all categories such as earnest $, deposits, taxes, fees, new loan, etc.?

Best Answer

  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    edited May 19 Accepted Answer
    Well the very basic accounting entry here, forgetting all the messy details is:
    Debit (increase) Home Account             $XXX     (Cost of new house)
    Credit (increase) Mortgage Account     $YYY     (Opening value of new mortgage)
    Credit (decrease) Bank Account            $ZZZ     (Down payment and other out of pocket costs to obtain house)
    where $ZZZ + $YYY = $XXX    
    Understand that these entries can happen in phases as you work through the process of buying the house as
    Debit (increase) Home Account          $AAA
    Credit (decrease) Bank Account          $AAA   (Pay earnest money into escrow)
    and
    Debit (increase) Home Account          $BBB
    Credit (decrease) Bank Account          $BBB   (Down payment for loan)
    or
    Debit (increase) Home Account          $CCC
    Credit (decrease) Bank Account          $CCC   (Additional funds due at closing)
    etc.
    If you do want to break out all the details of the entire home purchase/loan origination you might have to wait until you get the closing documents to do that since a lot of the detail is listed out there.  Assuming that your initial accounting entry is the very basic entry above, you might end up adjusting (down) the Home Account value as you recognize the expenses associated with these other costs.  So, for example, if a portion of the costs was a refund to the previous home owner of $1,500 of prepaid property taxes, these costs are typically treated a period expenses, not capitalized costs of the home, so you'd go back and make an adjustment of
    Debit (increase) Property Taxes Category    $1,500
    Credit (decrease) Home Account                   $1,500   (To recognize Property Tax expenses)
    In a similar fashion, if you paid out of pocket "points" to the lender you might capitalize that cost separately on your balance sheet if you plan to amortize the points or expense them directly if you plan to claim then on your taxes in the year of the purchase.
    It's just about impossible to create a cookbook of entries to be made here since it depends on costs that only you know and it depends on how detailed and/or correct you want your accounting entries to be when you're done.
    I would advise creating a manual, non-downloading, loan using the Quicken loan wizard.  The loan wizard will make a self-referencing "opening balance" entry in the loan register.  You can then go into the loan register and modify that opening entry, making it a transfer to the new Home Account.

Answers

  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    edited May 19 Accepted Answer
    Well the very basic accounting entry here, forgetting all the messy details is:
    Debit (increase) Home Account             $XXX     (Cost of new house)
    Credit (increase) Mortgage Account     $YYY     (Opening value of new mortgage)
    Credit (decrease) Bank Account            $ZZZ     (Down payment and other out of pocket costs to obtain house)
    where $ZZZ + $YYY = $XXX    
    Understand that these entries can happen in phases as you work through the process of buying the house as
    Debit (increase) Home Account          $AAA
    Credit (decrease) Bank Account          $AAA   (Pay earnest money into escrow)
    and
    Debit (increase) Home Account          $BBB
    Credit (decrease) Bank Account          $BBB   (Down payment for loan)
    or
    Debit (increase) Home Account          $CCC
    Credit (decrease) Bank Account          $CCC   (Additional funds due at closing)
    etc.
    If you do want to break out all the details of the entire home purchase/loan origination you might have to wait until you get the closing documents to do that since a lot of the detail is listed out there.  Assuming that your initial accounting entry is the very basic entry above, you might end up adjusting (down) the Home Account value as you recognize the expenses associated with these other costs.  So, for example, if a portion of the costs was a refund to the previous home owner of $1,500 of prepaid property taxes, these costs are typically treated a period expenses, not capitalized costs of the home, so you'd go back and make an adjustment of
    Debit (increase) Property Taxes Category    $1,500
    Credit (decrease) Home Account                   $1,500   (To recognize Property Tax expenses)
    In a similar fashion, if you paid out of pocket "points" to the lender you might capitalize that cost separately on your balance sheet if you plan to amortize the points or expense them directly if you plan to claim then on your taxes in the year of the purchase.
    It's just about impossible to create a cookbook of entries to be made here since it depends on costs that only you know and it depends on how detailed and/or correct you want your accounting entries to be when you're done.
    I would advise creating a manual, non-downloading, loan using the Quicken loan wizard.  The loan wizard will make a self-referencing "opening balance" entry in the loan register.  You can then go into the loan register and modify that opening entry, making it a transfer to the new Home Account.
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