When you purchase or refinance a home, your lender will provide you with a HUD-1 Settlement Statement. The HUD-1 statement lists the costs and fees incurred with the financing of a home. It is imperative that a buyer and seller understand and carefully review the document to ensure it is accurate. The HUD-1 statement is required by Real Estate Settlement Procedures Act (RESPA) to be used in federally regulated mortgage loans.
There are 12 main sections on the HUD-1 statement form, and many more subsections. Some sections refer specifically to borrower fees and costs, while other sections refer to the seller in the transaction. Parties to the transaction are required to get a copy of the HUD-1 settlement statement one day prior to closing. However, in many cases, entries on the form are still changing as late as a few hours before the closing. A real estate professional, your lender, or a title agent can answer questions you may have about the HUD-1 statement.
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Sections A Through I
Sections A through I are very general. They contain basic information about the loan and the parties to the transaction. These sections consist of loan type and the name and address of the borrower, seller, and lender. There is also information on the property location, the name and address of the settlement agent, the place of settlement and the date of closing. When reviewing the HUD-1, you should review the personal information of the parties of the transaction to make sure it is correct.
Section J contains information that relates primarily to the borrower. This section details the buyer's amount due, amounts paid, and amount of cash the borrower pays or gets at closing. The subsections in section J are 100-Gross Amount Due from Borrower, 200-Amounts Paid or in Behalf of Borrower, and 300-Cash at Settlement From/To Borrower. It is important to review this section carefully to determine what the borrower will need to pay or take home from closing.
Section K contains specifics on seller monies. It itemizes the amount due to the seller, as well as any adjustments made to the figure like taxes paid in advance. The subsections in section K are 400-Gross Amount Due to Seller, 500-Reductions in the Amount Due to Seller, and 600-Cash at Settlement To/From Seller. You need to carefully review this section to ensure that the calculations in this section reflect the terms in the agreed on contract.
Section L on a HUD-1 Settlement Statement contains specific details about the financing involved with the transaction. This section details information on costs paid to real estate professionals, loan fees, items paid in advance such as interest and homeowners insurance, and various required escrow items. Additional subsections detail items such as title fees, deed fees, and any additional settlement charges such as home inspections, survey, and home warranties. Section L subsections are 700-Total Sales/Broker's Commission on Price, 800-Items Payable in Connection with Loan, 900-Items Required by Lender to be Paid in Advance, 1000-Reserves Deposited with Lender, 1100-Title Charges, 1200-Government Recording and Transfer Charges, 1300-Additional Settlement Charges, and 1400-Total Settlement Charges. You must carefully review each item in this section before signing the closing documents. Ask any questions you may have prior to closing to make sure you understand all the charges in this section.