Understanding Your HUD-1 Settlement Statement
The HUD-1 is the form that accounts for all of the charges and credits that are incurred in obtaining a mortgage loan. Your HUD1 is an important form to review and understand before you close on a home. It will be prepared by your settlement agent and
will include an itemized run-down of the things that you and the buyer will need to pay at closing. The form will include both
credits and deductions taken from each party and will tally them up to include a grand total amount to bring to closing at the
end of the statement.
Because HUD-1s are a Real Estate Settlement Procedures Act (RESPA) requirement for all real estate transactions in the U.S., you
can expect (by law) to receive the statement at least one day before your closing date.
It’s important to double and triple check the numbers listed in the closing statement prior to closing, so
things can be adjusted. The particular charges you incur and their amounts depend upon your loan terms and
conditions. Here are some general explanations to help you understand the process.
Type of Loan
This section describes the type of loan that you’ve chosen.
VA = Federal Housing Administrator, RHS = Rural Housing Services,
Conv. Unins. = Convention Uninsured, VA = Veterans Affairs and Conv.
Ins. = Conventional Insured.
Mortgage Insurance Case Number
If you have less than 20% down, you’ll typically be required to have
mortgage insurance. If you have 20% down or more, this field will
probably be blank.
Settlement Agent
This section lists the attorney or escrow agent who is managing
your closing.
Summary of Borrower’s Transaction
This section summarizes all of the buyer’s costs and credits. Not only
that, it outlines the buyer’s down payment and loan amount. Note
that there is more detail about these line items on page 2. Be sure to
compare this section to your Good Faith Estimate on page 3.
Summary of Seller’s Transaction
This section summarizes all of the home seller’s costs and credits. It
includes money being transferred to the seller (e.g. the buyer’s downpayment and loan amount), plus any seller-paid closing costs and
payoff amounts for any mortgages currently held on the home.
Contract Sales Price
This is the agreed upon purchase price of the home.
Personal Property
If applicable, this includes the amount paid by the buyer to purchase
any additional items, not included in the price of the home.
Settlement Charges to Borrower
This item includes the total closing costs associated with the loan,
including: fees paid to your lender or broker, appraisal fees, taxes,
insurance payments, credit report fees and title charges. Ensure you
look at the total on the bottom of page 2 (line 1400) and this item are
the same.
Adjustments for Items Paid by Seller in Advance
This section outlines items the seller has paid in advance, that the
buyer has agreed to repay. For example, fees, taxes or services could be
included in this amount.
Gross Amount Due from Borrower
This item includes the total amount of money that the homebuyer owes
for the purchase of the home. The total includes all cost from items
101-112.
Amount Paid by or in Behalf of Borrower
This section outlines how the homebuyer plans to pay for the home.
Deposit or Earnest Money
If you included earnest money with your offer, you’ll see the credit of
this amount listed here.
Principle Amount of New Loan(s)
Listed here is the amount of money borrowed by the homebuyer for the
purchase of the home.
Existing Loan(s) Taken Subject to
Sometimes home loans can be passed onto the new homeowner. So
instead of taking out a new loan a home could be purchased through
the passing of the home loan. If the buyer is assuming a loan from the
seller, the amount still owed on the loan would be listed here.
Adjustments For Items Unpaid by Seller
This section outlines items that the seller owes, that will become the
buyers’ responsibility once they purchase the home. This could include
services, fees and/or taxes.
Total Paid by/for Borrower
This is the total amount of money paid by the buyer for the purchase
of the home, excluding any cash down payment. This item is the total
of lines 201-219.
Cash at Settlement from/to Borrower
This section outlines how much cash the buyer must bring with them
to closing.
Gross Amount Due From Borrower
This amount should be the same amount listed on line 120.
Less Amounts Paid by/for Borrower
Compare this number to line 220, it should be the same amount. When
this item (302) is subtracted from the amount on line 301, the amount
remaining will equal the amount that the homebuyer must bring to the
closing table as the down payment for the home purchase.
Items Payable in Connection with Loan
This section outlines all fees paid to the lender.
Origination Charge
This is the fee associated with getting a mortgage from your broker
or lender. It is the amount before any adjustments are made for your
interest rate. Compare against item 2 on your Good Faith Estimate.
Credit or Charge for Interest Rate
Depending on your loans’ interest rate, your origination charge may
have increased or decreased. Compare this amount to item 2 on your
Good Faith Estimate.
Your Adjusted Origination Charges
This is your final origination fee, after adjustments have been made
to your interest rate. Compare this amount to item A on your Good
Faith Estimate.
Appraisal Fee
Your lender will need to determine how much your house is worth, so
they can confirm it’s worth the purchase price. The fee to have the
home’s appraisal conducted will be included in this line item. Compare
this amount to line item 3 on your Good Faith Estimate.
Credit Report Fee
Lenders run a credit-check to review your financial history. This fee is
associated with running that report. Compare this amount to item 3 on
your Good Faith Estimate.
Cash to Borrower
This item equals the total amount owned by the homebuyer, minus the
deposit and loan amount. This item shows the total amount that the
buyer must bring to the closing table.
Tax Service
Lenders may hire a tax service to ensure property taxes are paid on
time by the homebuyer. It’s a form of protection for the lender or
broker. Compare this amount to item 3 on your Good Faith Estimate.
Total Reduction Amount Due Seller
This item should equal to total of lines 510-519. It includes all credits
paid from the seller to the buyer, which covers any expenses (e.g. fees,
assessments, taxes, etc.) outlined in the section above, “Adjustments
for Items Unpaid by Seller.”
Flood Certification Fee
It’s important to determine if your new house is sitting in a flood
zone, so this service fee is paid to determine your house isn’t at risk.
Compare this amount to item 3 on your Good Faith Estimate.
• Section L (Settlement Charges). Don’t assume these charges are
accurate. Double check the numbers against your Good Faith Estimate
• Section 700 (Agency Commissions). Ensure the commissions
outlined in this section are what you’ve agreed upon with your real
estate agent.
Settlement Charges
This section outlines all of items that the homebuyer must pay in
addition to the down payment. Settlement charges – also known
as ‘closing costs’ – include commissions, fees, taxes and insurance
payments that the homebuyer must pay. Be sure to compare these fees
to your Good Faith Estimate (GFE) to ensure all amounts listed below
are accurate.
Total Real Estate Broker Fees
This amount equals the total paid to the real estate agents or brokers
on the buyer and/or seller-side of the transaction.
Items Required by Lender to be Paid in Advance
As part of your closing costs, there may be some monthly or annual
payments that must be paid in advance.
Daily Interest Charges
The interest you owe on your loan in between your closing date and
your first mortgage payment is listed here. Compare this amount to
item 10 on your Good Faith Estimate.
Mortgage Insurance Premium
If your down payment is less than 20% of your home’s purchase price,
you’ll typically be required to have mortgage insurance. If it applies,
your monthly mortgage payment would be listed here. Compare this
amount to item 3 on your Good Faith Estimate.
Homeowner’s Insurance
Typically, you’ll be required to purchase one year’s worth of
homeowner’s insurance when you buy a home. This is something you’ll
purchase on your own. Compare this amount to item 11 on your Good
Faith Estimate.
Reserves Deposited with Lender
An escrow account is a reserve that can be used to cover any
unexpected increase in your monthly tax or insurance payments.
Your lender holds these reserves until your home is paid off.
Initial Deposit for Your Escrow Account
This is the sum all of the items listed below. The items below are
determined by multiplying each monthly payment by the number
of months of reserves the lender would like to have in your escrow
account. Compare this amount to item 10 on your Good Faith Estimate.
Homeowner’s Insurance
This section will total the homeowner’s insurance portion of your
deposit, by multiplying your monthly payment by the total number of
months you’ll be required to pay in advance.
Mortgage Insurance
This section will total the mortgage insurance portion of your deposit,
by multiplying your monthly payment by the total number of months
you’ll be required to pay in advance.
Property Taxes
This section will total the property tax part of your deposit, by
multiplying your monthly payment by the total number of months
you’ll be required to pay in advance.
Aggregate Adjustment
This will highlight any adjustments that need to be made in order for
the total of the above items to equal the amount on line 1001.
Title Charges
Title charges are the responsibility of the buyer and cover the cost to
check the official title of the property to ensure it is clear of any issues.
Title Services and Lender’s Title Insurance
This item covers the cost of the title company checking the properties
title to ensure there isn’t a claim against the property. This fee also
coves insurance to protect the lender in case something is discovered at
a later date. Compare this amount to item 4 on your GFE (page 2).
Settlement Closing Fee
This fee is for the escrow company or attorney to conduct the closing.
This cost is usually split 50/50 between the buyer and seller.
Owner’s Title Insurance
This amount covers the cost for the buyer to have insurance that
protects them against any future title issues. Compare this to item 5,
page 2 of you Good Faith Estimate.
Lender’s Title Insurance
This amount is included in item 1101.
Lender’s Title Policy Limit
This item shows how much insurance the lender has purchased.
Owner’s Title Insurance
This item shows how much insurance the buyer has purchases.
Agent’s Portion of the Total Title Insurance Premium
This item lists the part of the title insurance that is kept by the title
insurance agent who issues the policy.
Underwriter’s Portion of the Total Title Insurance Premium
This item lists the part of the title insurance that is kept by the
policy’s underwriter.
Government Recording and Transfer Charges
This section outlines the city, county and state fees requires to
purchase and transfer home ownership to a new person.
Government Recording Charges
This item covers the cost to have your local or state government
officials record the purchase of your home. Compare this amount to
item 7 on page 2 of your Good Faith Estimate.
Deed, Mortgage, Release
This item outlines individual charges that total line 1201.
Transfer Tax
This item covers the cost to have your local or state government
officials transfer the property ownership from one deed to another.
City/County Tax/Stamps
This item covers the county and city’s part of the transfer tax listed on
line 1203.
State Tax/Stamps
This item covers the state’s portion of the transfer tax listed on
line 1203.
Additional Settlement Charges
This section will outline any additional charges that weren’t includes in
the sections above.
Required Services That You Can Shop For
Before you purchase a home, there are quite a few items to take care
of pre-closing. For instance: pest inspection or surveys might be
conducted. The cost for these services that you’ve paid for or hired
yourself would be included here.
Total Settlement Costs
This item is the sum of all settlement costs that will be paid by
the buyer.
Comparison of GFE and HUD-1 Charges
This page was created to help you compare your Good Faith Estimate
to your lender’s final costs. This section includes items that cannot
increase from your original Good Faith Estimate. The numbers in the
GFE and the HUD-1 columns must match-up.
Our Origination charge
This is the fee associated with getting a mortgage from your broker
or lender. It is the amount before any adjustments are made for your
interest rate. Compare against item 2 on your Good Faith Estimate.
Credit or Charge for Interest Rate
Depending on your loans’ interest rate, your origination charge may
have increased or decreased. Compare this amount to item 2 on your
Good Faith Estimate.
Your Loan Term
This item outlines the number of years used to calculate your monthly
loan payment, which isn’t always the same as the number of years you
have in order to repay your loan.
Your Adjusted Origination Charges
This is your final origination fee, after adjustments have been made
to your interest rate. Compare this amount to item A on your Good
Faith Estimate.
Your Initial Interest Rate
This is the interest rate you negotiated with your lender. Compare this
to the “Summary of your loan” on page 1 of your Good Faith Estimate.
If you have chosen a fixed loan, this interest rate should stay the same,
if you’ve chosen an ARM this rate will most likely change over the life
of your loan.
Transfer Tax
This item covers the cost to have your local or state government
officials transfer the property ownership from one deed to another.
Compare to item 8, page 2 of your Good Faith Estimate.
Government Recording Charges
This item covers the cost to have your local or state government
officials record the purchase of your home. Compare this amount to
item 7 on page 2 of your Good Faith Estimate.
Increase Between GFE and HUD-1
This section will outline if there were any changes in cost between
your Good Faith Estimate and the HUD-1. By law, this total cost cannot
be more than a +10%. There should be both a dollar amount and
percentage represented here.
Charges that Cannot Change
This section outlines items that cannot change from the original Good
Faith Estimate.
Initial Deposit for Your Escrow Account
This is the sum all of the items listed below. The items below are
determined by multiplying each monthly payment by the number
of months of reserves the lender would like to have in your escrow
account. Compare this amount to item 10 on your Good Faith Estimate.
Daily Interest Charges
The interest you owe on your loan in between your closing date and
your first mortgage payment is listed here. Compare this amount to
item 10 on your Good Faith Estimate.
Homeowner’s Insurance
This section will total the homeowner’s insurance portion of your
deposit, by multiplying your monthly payment by the total number of
months you’ll be required to pay in advance.
Loan Terms
This section outlines basic information about your loan.
Initial Loan Amount
This item outlines how much money you’re borrowing from your lender.
Compare this to the “Summary of your loan” on page 1 of your Good
Faith Estimate.
Initial Monthly Amount Owed
This item lists your monthly mortgage payment minus your
homeowner’s insurance or taxes. Compare this to the “Summary of
your loan” on page 1 of your Good Faith Estimate.
Can Your Interest Rate Rise?
This section will explain if there is a risk of your interest rate rising
based on the type of loan you have chosen. It will also inform you, if
there is a risk of an interest rate increase, when that increase will take
place and the maximum amount the rate could increase.
Can Your Loan Balance Rise?
The answer to this section should be No. It’s not usually possible to
get a loan that doesn’t cover your loan’s interest. Compare this to the
“Summary of your loan” on page 1 of your Good Faith Estimate.
Can Your Monthly Payments Rise?
This section outlines if there is a possibility of your monthly payment
increasing, when it could increase and by how much. Compare this to
the “Summary of your loan” on page 1 of your Good Faith Estimate.
Does Your Loan have a Pre-Payment Penalty?
This section will let you know if your lender has included a penalty
for pre-paying down your loan ahead of schedule. Compare this to the
“Summary of your loan” on page 1 of your Good Faith Estimate.
Does Your Loan Have a Balloon Payment?
Beware of balloon payments, as their monthly payment plan terms are
longer than the pay-off terms. So for instance, your payments might be
based on a 30-year pay back term, but the loan has to be re-paid in 20.
So, at year 20, whatever you haven’t paid would be due to your lender
in one large sum. Compare this to the “Summary of your loan” on page
1 of your Good Faith Estimate.
Total Monthly Payment, Including Escrow Account
An escrow account is a reserve that can be used to cover any
unexpected increase in your monthly tax or insurance payments. Your
lender holds these reserves until your home is paid off. An escrow
account isn’t always required, but your lender might charge you a fee
for waiving this option. Compare this to “Escrow Account Information”
on page 1 of your Good Faith Estimate.
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