Get To Know The HUD-1 Settlement Statement

Big thanks to my rockstar closer Genevieve McCullough over at Urban Title in Edina for putting this mock HUD-1 Settlement statement together. She runs a very cool closing agency and is always on top things when it comes to her clients.

The HUD-1 Settlment Statement

To keep it simple, the HUD-1 is a uniformly used form at the time of closing that itemizes all the incoming and outgoing funds at the time of a closing. Back in the day, the year 1974 to be more exact The Real Estate Settlement and Procedures Act (RESPA) was created as a level of protection for consumers to be made aware of all disclosures and charges associated with a real estate transaction.

Breaking Down The HUD-1

The best way to view the HUD-1 is to start on page 2, this where all the numbers come from and are brought to page 1. For the purpose of this post we are just going to start on page 1, I know… why be confusing.

I suggest following along with the dummie mock version here of the HUD-1 Settlement form

Sections A-I

This section is probably the easiest to understand and breaks down everybody involved in the settlement. This is where you will find the names of borrowers and sellers, a long with the lender information, time/date/place of closing, etc.

Section J

This is the summary of the borrowers transaction. Section 100 is the gross amount due from the borrower and includes the sales price, personal property and adjustments made by the seller in advance.

Section 200 covers the amounts paid by or on behalf of the borrower. This is going to be the area where all the funds paid to the buyer will appear. You will see credits for earnest money, taxes that have yet to be paid by the seller, etc.

Section 300 is the total cash to or from the borrower. If the number is negative on line 303 the buyer will receive cash back at closing, if the number is positive, it will indicate the amount of funds needed to close the transaction.

Section K

If the borrower has one, then the seller has to have one just as well which would be the summary of the seller’s transaction. Section 400 looks at the gross amount due to the seller. Along with the contract sales price, personal property and any other amounts of money due to the buyer paid for by the seller.

Section 500 is where you will find reductions in amounts due to the seller. Any liens that have yet to paid off such as existing mortgages, prorated taxes and any utilities left unpaid will be paid.

Section 600 is going to be cash at settlement due to/from the seller. Line 603 usually indicates the amount of cash owed to the seller. It is possible that the seller will have to bring money to closing.

Section L=Settlement Charges

This is the 2nd page of the HUD-1 and this is where all the charges are spelled out and then brought to the first page.

Section 700 outlines all the commissions paid out to the different real estate agencies involved in the transaction. The funds are paid for from the seller.

Section 800 deals with ‘Items Payable In Connection With The Loan’. These items are typically paid for by the buyer, but in the case of the mock HUD-1, the seller is paying because of seller paid closing costs.

Section 900 are items required by the lender to paid in advance. These fees include interest to be collected at closing, mortgage insurance premiums, hazard insurance premiums and any miscellaneus fees. Once again these fees are typically paid for by the buyer but the seller is paying some in this particular instance.

Section 1000 is all the fees that deposited with the lender in advance. Such as mortgage insurance, hazard insurance and county/city taxes. These fees are usually in escrow and the number of months varies for what a lender can collect. This is to make sure the lender doesn’t collect more than necessary.

Section 1100 has to do with title charges. These are fees associated with the transfer of title, examination of title, title search, title insurance, etc. If there are any attorney fees, they are also listed in this section