Understanding the HUD Statement

Looking to buy a home? Chances are you know that real estate transactions come with their fair share of paperwork, forms, and contracts.

One of the most recognized forms associated with real estate transactions is the HUD-1 Settlement Statement.

The HUD-1 settlement statement is a standard government real estate form that used to be used by the closing agent to itemize all charges imposed upon a borrower and seller for a real estate transaction.

It was designed to give each party a complete list of their incoming and outgoing funds.

Beginning in 2010, the HUD-1 settlement statement also contained what was referred to as a Good Faith Estimate or GFE. The GFE estimated settlement figures provided by the lender upon application of the loan.

Borrowers could compare their Good Faith Estimate to the HUD-1 Settlement Statement and ask their lender or broker about any changes.

In 2015, the HUD-1 Settlement Statement became obsolete. It’s been replaced by a document called the Closing Disclosure that consolidates the HUD-1, Good Faith Estimate, and Truth in Lending Act disclosures. These days the HUD-1 is used primarily to settle reverse mortgage and mortgage refinance transactions.

Even though HUD-1 is used only in specific cases, it’s still important to understand.

The HUD-1 is intended to be reviewed reverse side first (called the verso). The verso has two columns:

The left-hand column itemizes the borrower’s charges, and the right-hand column itemizes the seller’s charges.

The borrower’s charges include mortgage fees such as the loan origination fee, discount points, a credit report, and appraisal and flood certification fees. These charges also include prepaid interest cost, homeowner’s insurance fees, property taxes, owner’s and lender’s title insurance, and the closing agent’s fees.

The itemized seller charges include real estate commission, any contractually agreed-upon credit to the buyer and mortgage pay-off information, if any.

The seller’s itemized charges typically are lower than the buyer’s charges.

The figures on the HUD-1 verso are added up, and the totals are carried to the form’s recto, or front side. The amount of cash required from the borrower and the amount to be given to the seller appear at the bottom of the recto.

This all may sound confusing, as real-estate forms often are. But when you choose a qualified and trusted real estate title and abstract company, you can rest assured that your transaction is in good hands, and you’re adequately represented in what will likely be the largest financial transaction you are involved in.

Learn more about how Clean Title can help you navigate the complicated waters of your real estate transaction by giving us a call today.

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