HUD-1 Settlement Statement Definition | The bank rate

To understand all the costs of a real estate transaction, there are standardized documents designed to help you understand who is paying what and how much. Depending on the type of transaction, one of these forms may be the HUD-1 statement.

What is a HUD-1 statement?

Form HUD-1 is a three-page mortgage document required in some cases. This document contains a detailed list of all fees charged for the loan. This form is also commonly referred to as a settlement statement, as it is one of the last documents to be completed before the transaction is officially closed, or “settled”.

Mortgages requiring HUD-1 reporting

The HUD-1 form was provided in most real estate transactions, but today it plays no role in typical home purchases. If you receive a HUD-1 form these days, you are likely dealing with one of these specific types of mortgages:

  • Reverse Mortgage: If you are a senior homeowner and are leveraging your equity through a reverse mortgage, you will receive the HUD-1 statement.
  • Refinance: If you are refinancing your mortgage, you may receive the HUD-1 form, but not always. You may instead receive a final disclosure – more on that below.

HUD Settlement Statement vs Closing Disclosure

The most common settlement statement in real estate is a closing disclosure, which is now issued to most borrowers. The HUD-1 and the Closing Disclosure serve the same purpose: to inform borrowers of all the costs of their mortgage. Differences between the two include:

  • How long is it – Closing information is designed to be easier to read for borrowers. It’s a little longer — five pages for the final disclosure versus three for the HUD-1 form — but it’s easier to skim and understand.
  • When you will receive it – The law requires that borrowers receive closing information at least three business days before the scheduled closing. The HUD-1 only has a one-day advance policy, so borrowers who receive this form have a shorter time frame to resolve any issues.

Understanding the HUD-1 Form

The three pages of the HUD-1 form include a summary of all costs associated with the mortgage (page 1), an itemized list of each expense (page 2), and a comparison between your original loan estimate and the final settlement (page 3 ). Here’s an overview of everything you’ll see:

  • Commissions due to real estate agents
  • Loan fees, including origination fees, prepaid points, appraisal fees and all fees for tax services, flood certification and credit reports
  • Advance payments for daily interest, home insurance and mortgage insurance
  • Escrow deposits for home insurance, mortgage insurance and property taxes
  • Costs of title services and title insurance
  • Fees for government registration services
  • Amount of your loan, interest rate and monthly payment

Pay particular attention to page 3. This is where you can easily compare costs with the original loan estimate, and it includes a guide to what fees are allowed to change from that estimate and by how much.

Additionally, this page includes key questions that could impact your long-term financial well-being, including whether your interest rate may increase and whether you may be penalized for paying off your balance early.

At the end of the line

If you receive the HUD-1 statement, read this document carefully. Ideally, have a real estate lawyer help you check it out to make sure you’re not overpaying anything and that there are no mistakes that could cost you extra money. Remember: you could pay off this amount for decades, so the day you receive the HUD-1 plays a very important role in your financial future.

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