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.