UNDERSTANDING THE SETTLEMENT STATEMENT

What is the HUD-1? The HUD-1 is a form used by the settlement agent, typically a law firm, to itemize all charges related to a buyer/borrower and seller in a real estate transaction.  When is the HUD-1 Used? The Real Estate Settlement Procedures Act (RESPA) requires the HUD-1 to be used as the standard real estate settlement form in all transactions in the United States which involve federally related mortgage loans. What are the different entries on the HUD-1? The First Page of the Settlement Statement   Settlement Statement: merely gives the names U.S. Department of Housing and Urban Development Type of loan: In the first section, one of the following boxes will be marked, indicating the type of loan in the transaction. 1.      FHA 2.      FmHA 3.      CONVENTIONAL UNINSURED (Conv. Unins) 4.      VA 5.      COVENTIONAL INSURED (Conv. Ins.) Section 6 is where you will find the file number. This is the attorney´s file number Section 7 is the Lenders Loan Number for the file Section 8 is the Mortgage Insurance Case Number; this will most often be blank unless an FHA loan or a VA loan. Note Name and Address of Borrower; this will usually be their current address, but sometimes will be the property address Name and Address of Seller; this should be the forwarding address for the seller Name and Address of Lender Property Location This should include the street address as well as at least a portion of the legal description. Settlement Agent: this is the attorney closing the transaction. Settlement Date: date of the closing. Summary of Borrower´s Transaction: It is on the left side of the page where all of the costs pertaining to the borrower will be found.  Lines 101 to 112 are costs being charged to the borrowers: 1.      Line 101 is the contract sales price 2.      Line 102 is any Personal Property charges 3.      Line 103 is the total of the settlement charges. 1.      This line is the total of all the charges found on the second page.  It is a repeat of line 1400 from the second page. 4.      Lines 104, 105, 109, 110, 111 and 112 are where any fees regarding HOA dues will be placed. If taxes are being paid at closing, then lines 106 and 107 are where those numbers will be prorated. 1.      This number will be a prorated amount from the date of closing until the end of the year.  (The amount of time in which the buyer will actually own the property during this tax year).  Line 120 is a total of all the costs from lines 101 to 112.  Lines 200 to 219 are credits being given to the borrower: 1.      Line 200 would be any amounts paid by or on behalf of borrower 2.      Line 201 is the deposit or earnest money 3.      Line 202 is where the amount of the 1st loan goes. 4.      Line 209 is where the proceeds from the 2nd mortgage (if any) are listed. 5.      If taxes are not being paid at closing and will instead be paid out of the buyer´s new escrow account, then lines 210 and 211 are where the buyer will receive credit from the seller. 1.      Buyer will receive a pro-rated credit back from the beginning of the year until the date of closing (The amount of time in which the buyer did not own the property during this tax year.)  Line 220 is a total of those credits from lines 200 to 219. Line 301 is a reprint of the total in line 120 (gross amounts due from borrower) Line 302 is a reprint of the total in line 220 (Total paid by/for borrower) Line 303 is the difference between lines 301 and 302.  It will either be the total amount that the borrower needs to bring to closing, or it is the amount of money the borrower will receive at closing.  Summary of Sellers´ Transaction: On the right side of the page is where all of the costs associated with the seller will be printed. Lines 400 to 412 contain the total credits to the seller: 1.      Line 401 is the contract sales price 2.      Lines 406 and 407 is the tax information 1.      Seller will receive a prorated portion of the taxes from the date of closing until the end of the year.  This is only if taxes are either being paid at closing, or have already been paid. 2.      This is a credit back to the seller for the amount of time in which he will not own the property during the tax year. 3.      These numbers will often be the same as what you see on the buyer´s side and this is confusing.  Remember that it is a credit to the seller, but a debit to the buyer. Lines 409 to 412 will contain any other credits due to buyer:  1.      Often there will be a prorated credit back for HOA dues that have already been paid.   Line 420 is the total of those credits from lines 401 to 412. This is the Gross Amount Due to Seller.  Lines 500 to 519 are the total amounts of deductions taken from the gross amount due to seller. 1.      Line 501 will be for the excess deposit.  This will normally only occur when the buyer has paid the earnest money or deposit directly to the seller and not to the real estate agency.  2.      Line 502 is the total amount of settlement charges charged to the seller on page two.  It is reprint of the total figure given in line 1400 on page two) 3.      Lines 504 to 505 are payoff information regarding the seller´s current loan or loans. 4.      Lines 506 to 509, and also 513 to 519 are where you will find any miscellaneous charges to seller.  1.      Here you will find Home Warranties, repair allowances, etc. 2.      If taxes are paid at closing, you may also find the entire tax bill amount listed here.  Remember though, the seller is getting a prorated portion back on lines 406 and 407 and the buyer is paying the prorated portion on lines 106 and 107. 5.      Lines 510 and 511 are where the seller will pay a prorated portion of the taxes if the tax bill has not already been paid nor is being paid at closing.  These numbers will correlate with a buyer credit on lines 210 and 211. Line 520 is the total amount of those reductions from lines 501 to 519. Line 601 is a reprint of the Gross amount due to seller (line 420) Line 602 is a reprint of the total reductions (line 520) Line 603 is the difference between lines 601 and 602.  This will be either the total amount the seller is walking away from the closing with, or in the rare occasion, the amount the seller is required to bring to closing.  The Second Page of the Settlement Statement   Settlement Charges: Here on the second page, you will find all of the costs associated with the loan.  These will be the lender fees, attorneys fees, title insurance, and of course the commission. Just like on the first page, the buyers figures will be listed in the left hand column and the seller´s figures will be listed in the right hand column. Lines 700 to 704 deal with the Total Sales/Broker´s Commission 1.      The total amount the commission is based on will be listed on line 700. 2.      Lines 701 and 702 will list each agent´s commission. An asterisk will mark which agent is holding the earnest money.  3.      Line 703 will list the total amount of commission paid.  This will almost always show up in the seller´s column.  Lines 800 to 815 are the Items Payable in Connection with the loan. 1.      This is where all of the lender´s fees will be listed. 2.      Occasionally, if there are more fees then there are spaces, then the remaining lender´s fees will be found at the bottom of page two on lines 1303 to 1308. 3.      Line 801 is the Loan Origination Fee. It will also list the percentage of the loan amount on which the fee is based. 4.      Line 802 is the Loan Discount Fee and percentage. 5.      Line 803 is the Appraisal Fee 6.      Line 804 is the Credit Report 7.      Line 805 is the Lender´s Inspection fee 8.      Line 806 is the Mtg. Insurance application fee. 9.      Line 807 is the Assumption Fee. 10. Lines 808 to 815 can include items such as Underwriting fees, Flood certification, document prep fees, administration fees, GA residential Loan fee, Application fees, and Broker fees. Lines 900 to 905 are all the items that are required by the lender to be paid in advance. 1.      Line 901 is the daily interest.  1.      Interest is always paid backwards (in arrears); therefore, at closing the buyer will pay daily interest from the date of closing until the end of the current month.   Their first payment will then not be due for an entire month.  a.      For instance, if you buyer closes on March 24th, they will pay daily interest from March 24th until April 1st, or 8 days of interest.  Their first payment however would not be due until May. 2.      On rare occasions, when your buyer closes very early in the month, the lender may give them the option of taking an interest credit and then their payment will be due on the first of the following month. a.      For instance, if they close on the 2nd of April, they would get two day´s of interest as a credit and then their first payment would still be due the 1st of May. 2.      Line 902 is the Mortgage Insurance Premium.  1.      This is only if the lender or HUD is requiring upfront mortgage insurance to be paid. 3.      Line 903 is the Hazard Insurance Premium 1.      One year of hazard insurance will be paid at closing. If the borrower has already paid prior to closing, then this amount will be shown as POC (Paid Outside of Closing). Lines 1000 to 1008 deal with your reserves or your escrow accounts. 1.      This is where it shows how much the lender is going to collect to hold in reserves for taxes, insurance, and mortgage insurance. 2.      This area has nothing to do with neither the buyer´s nor the seller´s current escrow account.  This is setting up a new escrow account for the buyer in order for NEXT year´s taxes and insurance to be paid. 3.      Not every buyer will have an escrow account; some will choose to pay their taxes and insurance on their own.   4.      How much is collected depends upon when you close and what county the property is located in. 1.      For instance, if you close later in the year and the tax bill has already been paid or is being paid at closing, then the lender will only need to collect a few months in reserves. 2.      Most lenders will collect at least 2 months reserves.  5.      Line 1008 is the Aggregate Credit for any Escrow Overages 1.      Basically what happens here is that the lender is only allowed by law to hold so much money in the escrow account.  They go ahead and collect what they need on the front end, and any amount over that legal limit are immediately credited back to the buyer.  Lines 1100 to 1113 are the Title Charges 1.      Line 1103 is the Title exam charge 2.      Line 1107 is the attorney´s fees 3.      Line 1108 is the Title insurance. 1.      This is the total amount of insurance purchased.  If the buyer purchases owner´s title, then the figure on line 1108 includes both the owner´s title insurance fee and the lender´s title insurance fee. 2.      Line 1109 breaks down the cost of the lender´s coverage 3.      Line 1110 breaks down the cost of the owner´s coverage (if any) 4.      We will always include owner´s title in the total figures, until and unless the buyer decides to waive the coverage. 4.      Line 1111 will be the seller´s post-closing, courier and handing fees. 5.      Line 1112 is the Buyer´s courier/overnight fee. Lines 1200 to 1205 are the Government Recording and Transfer Charges 1.      Line 1201 is the recording fees.  These are what the state charges to record both the Warranty Deeds and Security Deeds.  2.      Line 1203 contains the state taxes. 1.      This includes the state transfer tax, which is paid by the seller in the GAR contract. 2.      And the Georgia intangible tax, which is paid by the buyer. 3.      Line 1204 will be where any additional recording fees are. 1.      For instance, Fulton County charges an extra $15.00 per deed for recording. 2.      Also there could be extra recording for Power of Attorney, or additional quit-claims or affidavits. Lines 1300 to 1308 are any additional settlement charges 1.      Line 1301 is any survey charge 2.      Line 1302 is any pest inspection charge 3.      Line 1304 will be the buyer´s post-closing fee. Line 1400 is a total of all the figures found in lines 700 to 1308. 1.      Remember line 1400 is reprinted on the first page 1.      Line 103 for the buyer 2.      Line 502 for the seller.       Remember: that if a seller is paying an amount towards buyer´s closings costs, there are several figures that will not be included in that amount.  This is because there are certain figures that a seller pays regardless of whether or not they are giving any towards buyer´s closing costs.  These are the figures found on lines 703 (commission), line 1111 (seller´s post closing) and often times on line 1203 the number printed will include both the transfer tax (paid by seller) and the intangibles tax (paid by buyer).  Also, if a seller agreed to pay for a survey or is required to pay for the termite letter, then these figures will also not be included.