Closing On A Home? Tips For Understanding the HUD-1
When you agree to purchase a home and begin the closing process, you'll be issued an HUD-1 Settlement Statement. The HUD-1 will detail the costs associated with the purchase of the property and will identify which party is responsible for which cost. On this form, however, some charges are aggregated together so that only the total is shown, thus it won't provide specific details on that category of charges. Real estate professionals involved in the transaction, like a real estate agent, broker or attorney can help answer any questions regarding these closing costs.
The details of the HUD-1
The first page of the HUD-1 is divided into two columns. These are sections J and K. Section J is a summary of your transaction and section K is a summary of the seller's transaction. This page will show you how much you owe the seller and includes settlement charges and adjustments to the transaction. At the bottom of the page are lines 303 and 603. Line 202 shows how much the buyer owes or is owed and Line 603 will detail how much the seller owes or is owed.
Settlement costs are found on page two of the HUD-1 under section L. These costs are broken into a number of categories including real estate broker fees, items required by the lender to be paid in advance, items payable in connection with the loan, reserves deposited with the lender, title insurance charges, government recording and transfer charges as well as additional settlement charges. The totals of charges are found at Line 1400 at the bottom of the page and are referenced on lines 103 for the borrower and 502 for the seller on the first page.
The third page of the HUD-1 Settlement State shows the charges from the buyer's Good Faith Estimate issued by the lender to allow buyers and their real estate agent to see any increases in charges. While increases in charges are not uncommon fees under the "Charges that Cannot Increase" section are a tolerance violation and the lender is required to pay those fees. There's also a section titled "Charges that in Total Cannot Increase More Than 10 Percent" and any fees greater than 10 percent must be paid by the lender. Buyers should remember that there is a section that includes charges that can change and the buyer is responsible for any of these increases.
Loan terms on the third page include the loan amount, term, interest rate and other payment information.