Understanding the HUD-1 Settlement Statement

Real Estate Influence
July 30, 2012 — 1,272 views  
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The HUD-1 Settlement Statement is often referred to as the "HUD-1." In the United States, this document is the final accounting of all costs and credits associated with the successful completion of the mortgage process, and reveals how much money the borrower will bring to closing.  A HUD-1 is required in any type of mortgage process, including refinancing and purchasing procedures.

The document is typically completed by the closing agent, who is often a representative from the title company. He or she will gather all of the important information about the mortgage process and complete the Settlement Statement for the buyer and seller to certify the accuracy of the statement. The closing agent will then disperse all the funds as indicated on the Settlement Statement.

According to The Bigger Pockets, an online real estate magazine, the first page of the HUD-1 includes a summary of the borrower's transaction and a summary of the seller's transaction. The second page of the statement documents the costs that are paid from the borrower's funds at settlement and from the seller's funds at settlement. All three parties - the buyer, seller and title agent - must agree that all of this information is accurate and sign at the bottom of the second page.

The National Association of Realtors (NAR) explains real estate professionals should encourage their clients to gather all paperwork received during the home-buying or refinancing process the day before closing. These documents should include the good-faith estimate, a contract, proof of title search and insurance, a flood certification, mortgage insurance and proof of homeowners insurance. The HUD-1 should be compared against the good-faith estimate to see if the actual closing costs differ significantly.

The closing day is the final opportunity to make any last-minute changes to the transaction, so it is essential realtors spend this time thoroughly examining the Settlement Statement. The NAR states that by law, all parties have the right to review the HUD-1 24 hours before closing. This time should be utilized to resolve any mistakes or problems on the settlement.  The real estate agency, the closing attorney and title company should be available on the buyer's and seller's behalves to answer any questions.

Real Estate Influence