The HUD-1 Settlement Statement, also known as the Closing Statement, is a standardized form used in real estate transactions in the United States. It is issued by the escrow or settlement company to both the buyer and seller during the closing of a real estate transaction, such as when buying or selling a home. The HUD-1 Statement provides a detailed breakdown of all the financial transactions involved in the sale, including the costs and payments associated with the purchase.
Here's a brief overview of why the HUD-1 is used and what information it provides to both the buyer and seller:
1. **Financial Transparency:** The primary purpose of the HUD-1 is to provide a clear and transparent summary of all financial transactions related to the real estate transaction. It ensures that both the buyer and seller have a complete understanding of where the money is going and coming from in the deal.
2. **Legal Requirement:** The HUD-1 Settlement Statement is required by the Real Estate Settlement Procedures Act (RESPA) for most real estate transactions involving a federally related mortgage loan. It helps ensure compliance with federal regulations and protects the interests of both parties.
3. **Transaction Details:** The HUD-1 includes detailed information about the property, the parties involved, the loan terms (if applicable), and all the associated fees and charges. It breaks down costs such as the purchase price, loan origination fees, title insurance, property taxes, and more.
4. **Credits and Debits:** It shows credits to the buyer and debits to the seller, indicating who is responsible for paying various expenses in the transaction. This includes earnest money deposits, down payments, and prorated property taxes and utilities.
5. **Final Settlement Figures:** At the bottom of the HUD-1, you'll find the final settlement figures for both the buyer and seller, showing the total amount due to or from each party. This is the amount of money that will change hands at the closing.
Here is a simplified example of what a buyer's HUD-1 might look like:
```
HUD-1 Settlement Statement
Buyer: [Buyer's Name] Date: [Closing Date]
Property: [Property Address]
Section 100 - Gross Amount Due from Borrower
Line 101 - Gross Sales Price: $300,000
Line 103 - Settlement Charges to Borrower: $5,000
Section 200 - Amounts Paid by or on Behalf of Borrower
Line 201 - Deposit or earnest money: $10,000
Line 202 - Principal Amount of New Loan: $240,000
Section 300 - Cash at Settlement From/To Borrower
Line 301 - Gross Amount Due from Borrower: $295,000
Line 302 - Adjustments for items paid by seller: $3,000
Line 303 - Cash at Settlement To/From Borrower: $292,000
...
Section 500 - Reduction in Amount Due to Seller
Line 501 - Excess Deposit (from Line 201): $10,000
Line 502 - Settlement Charges to Seller: $8,000
Line 503 - Cash at Settlement To/From Seller: $2,000
Section 700 - Total Settlement Charges
Line 700 - Total Settlement Charges: $13,000
```
A seller's HUD-1 would have a similar format but would show the transaction from the seller's perspective, detailing the proceeds they will receive from the sale.
Please note that this is a simplified example, and a real HUD-1 Settlement Statement would contain more detailed information and line items, as well as specific figures based on the details of the transaction. It's essential to review the HUD-1 carefully during the closing process to ensure accuracy and transparency in the transaction.
The following are instructions for completing the HUD-1 settlement statement, required under section 4 of RESPA and 12 CFR part 1024 (Regulation X) of the Bureau of Consumer Financial Protection (Bureau) regulations. This form is to be used as a statement of actual charges and adjustments paid by the borrower and the seller, to be given to the parties in connection with the settlement. The instructions for completion of the HUD-1 are primarily for the benefit of the settlement agents who prepare the statements and need not be transmitted to the parties as an integral part of the HUD-1. There is no objection to the use of the HUD-1 in transactions in which its use is not legally required. Refer to the definitions section of the regulations (12 CFR 1024.2) for specific definitions of many of the terms that are used in these instructions.
General Instructions
Information and amounts may be filled in by typewriter, hand printing, computer printing, or any other method producing clear and legible results. Refer to the Bureau's regulations (Regulation X) regarding rules applicable to reproduction of the HUD-1 for the purpose of including customary recitals and information used locally in settlements; for example, a breakdown of payoff figures, a breakdown of the Borrower's total monthly mortgage payments, check disbursements, a statement indicating receipt of funds, applicable special stipulations between Borrower and Seller, and the date funds are transferred.
The settlement agent shall complete the HUD-1 to itemize all charges imposed upon the Borrower and the Seller by the loan originator and all sales commissions, whether to be paid at settlement or outside of settlement, and any other charges which either the Borrower or the Seller will pay at settlement. Charges for loan origination and title services should not be itemized except as provided in these instructions. For each separately identified settlement service in connection with the transaction, the name of the person ultimately receiving the payment must be shown together with the total amount paid to such person. Items paid to and retained by a loan originator are disclosed as required in the instructions for lines in the 800-series of the HUD-1 (and for per diem interest, in the 900-series of the HUD-1).
As a general rule, charges that are paid for by the seller must be shown in the seller's column on page 2 of the HUD-1 (unless paid outside closing), and charges that are paid for by the borrower must be shown in the borrower's column (unless paid outside closing). However, in order to promote comparability between the charges on the GFE and the charges on the HUD-1, if a seller pays for a charge that was included on the GFE, the charge should be listed in the borrower's column on page 2 of the HUD-1. That charge should also be offset by listing a credit in that amount to the borrower on lines 204-209 on page 1 of the HUD-1, and by a charge to the seller in lines 506-509 on page 1 of the HUD-1. If a loan originator (other than for no-cost loans), real estate agent, other settlement service provider, or other person pays for a charge that was included on the GFE, the charge should be listed in the borrower's column on page 2 of the HUD-1, with an offsetting credit reported on page 1 of the HUD-1, identifying the party paying the charge.
Charges paid outside of settlement by the borrower, seller, loan originator, real estate agent, or any other person, must be included on the HUD-1 but marked “P.O.C.” for “Paid Outside of Closing” (settlement) and must not be included in computing totals. However, indirect payments from a lender to a mortgage broker may not be disclosed as P.O.C., and must be included as a credit on Line 802. P.O.C. items must not be placed in the Borrower or Seller columns, but rather on the appropriate line outside the columns. The settlement agent must indicate whether P.O.C. items are paid for by the Borrower, Seller, or some other party by marking the items paid for by whoever made the payment as “P.O.C.” with the party making the payment identified in parentheses, such as “P.O.C. (borrower)” or “P.O.C. (seller)”.
In the case of “no cost” loans where “no cost” encompasses third party fees as well as the upfront payment to the loan originator, the third party services covered by the “no cost” provisions must be itemized and listed in the borrower's column on the HUD-1/1A with the charge for the third party service. These itemized charges must be offset with a negative adjusted origination charge on Line 803 and recorded in the columns.