Get To Know Your HUD1 Statement

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Many real estate transactions use the HUD-1 Settlement Statement form. If you buy or sell real estate, you may receive one, so it is important to understand all of its functions.

When is a HUD-1 Settlement Statement form used?

Most often, the HUD-1 form is used to settle mortgage refinance, and reverse mortgage transactions. Real estate agents itemize the costs for which the buyer or the seller are responsible. When a federally insured lender is involved in financing the purchase, the Real Estate Settlement Procedures Act requires that the HUD-1 form is completed at the closing.

If you receive the form at closing, be sure to keep it in a safe place. Information from the HUD-1 Settlement Statement form is needed for tax purposes when completing tax returns for the years in which you purchased and later sold the real estate.
What itemized costs does the HUD-1 include?

For the seller, the itemized costs include:

  • The real estate agent’s commission
  • Credit owed to the buyer (if any)
  • Mortgage payoff information (if any)

For the buyer, the itemized costs include:

  • Loan origination fee
  • Prepaid interest cost
  • Discount points
  • Credit report
  • Flood certification fee
  • Appraisal fee
  • Homeowner’s insurance fee
  • Property taxes
  • Lender’s and owner’s title insurance
  • Closing agent’s fee

A Breakdown of the HUD-1 Settlement Statement

The various sections of the HUD-1 are lettered and focus on different pieces of information. Here is a general explanation of the sections.
Sections A-I:  Reference and Identification

These sections provide information about the parties involved in the real estate transaction, the mortgage loan number, and the closing which includes the settlement agent’s file number.

Sections J and K: Cost and Credit Summaries

These sections detail transactions between the seller and borrower, including the cost of the house and what method of payment is being used to pay for it. This is also where borrower debits and seller credits are shown. The purchase price is listed, in addition to any personal property that’s included with the sale.

The seller’s and borrower’s portions of the real property taxes and assessments as of the closing date are listed out. The amount of real property taxes that are due but not yet payable are credited to the borrower, and debited to the seller. Any previous loans that are payed out as a result of the closing are also detailed.

In addition to a summary of the payments and fees from the following Section L, the amount due at closing from the buyer is noted in these sections. This is also known as the borrower’s “bottom line.”

Section L: Detailed Settlement Charges for Seller and Borrower

These detailed charges include:

  • Broker’s commission. The deposit amount toward it if any, and what percentage each broker will receive
  • Loan charges. This includes the origination fee, points, and third-party service fees such as appraiser, flood certification, credit reporting, and tax preparers.
  • Tax and insurance reserves. This details what will be paid to the lender at closing.
  • Prepaid interest, mortgage insurance premiums, homeowner’s insurance.
  • Escrow fees and title insurance. This includes premiums for the owner and attorney’s fees.
  • Municipality, county, and state government charges. These are for recording the mortgage, deed, and transfer taxes.
  • Additional third-party fees. This includes surveyor’s fees, inspector’s fees, and any additional escrow fees.

For more information about the Hud-1 Settlement Statement, contact a local real estate attorney today.