What is a HUD Statement?

When you refinance or purchase a home, one of the first things that your lender is going to provide you with is a HUD-1 Settlement Statement. This particular statement contains all the fees and costs that incurred with the financing of your home. In order to ensure that it is 100% accurate, it is important for both the seller and buyer to fully comprehend this document and to review it as it contains a handful of details that are important for both parties. The Real Estate Settlement Procedures Act (RESPA) requires that the HUD-1 statement is utilized in every federally regulated mortgage loan.

When it comes to the preparation that regards to this form, which is given to home buyers and seller, the settlement agents are the ones who are responsible of preparing it. These agents may be title-company employees, lender employees, mortgage brokers, real estate brokers, or attorneys.
Identification of HUD-1 Settlement Statement

The HUD-1 Settlement Statement form contains twelve main sections, and a lot more subsections. You will notice that some sections on the form are specifically referred to the borrower’s costs and fees. Other sections on the form refer to the seller that’s in the transaction. One day prior to the closing, every party to the transaction is required to attain a copy of the HUD-1 Settlement Statement form. However, in a lot of cases, the form’s entries are still changing a couple of hours before the closing is conducted. A title agent, lender, or real estate professional can answer any question you may have that regard to the HUD-1 Settlement Statement form.

Sections A Through I

The sections A though I on the form are very general. These sections have very basic information about all parties in the transaction and of course, the loan. These particular sections consist of the address and name of seller, lender, and borrower, and the loan type. You will also find information on the date of closing, the place of settlement, address and name of the settlement agent, and property location. When you review the HUD-1 Settlement Statement, in order to ensure that it is accurate, you should make sure to review the personal information of the parties that are involved in the transaction.

Section J

Information that primarily relates to the borrower can be found on Section J. This section contains details on the buyer’s amounts paid, amount due, and amount of cash that the borrower gets or pays at closing. The subsections in section J are 300-Cash at Settlement To/From Borrower, 200-Amounts Paid or in Behalf of Borrower, and 100-Gross Amount Due from Borrower. In order to determine what exactly the borrower will need to take or pay home from closing, it is important that this section is carefully reviewed.

Section K

This section has specifics on monies of seller. The amount that is due to the seller is itemized, as we as all the adjustments made to the figure, like any taxes paid in advance. The subsections in section K are 600-Cash at Settlement From/To Seller, 500-Reductions in the Amount Due to Seller, and 400-Gross Amount Due to Seller. You need to make sure that you review this section very carefully in order to ensure that all the calculations that are found on this section contain the terms in the agreed contract.

Section L

On Section L, you will find details that are specific about the financing that is involved with your transaction. This section on the HUD-1 Settlement Statements details information on loan fees, costs that were paid to real estate professionals, items paid in advance such as homeowners insurance and interests, and several required escrow items. You will notice that additional subsections detail items such as home warranties, survey, home inspections, deed fees, and title fees. Section L subsections are 1400-Total Settlement Charges, 1300-Additional Settlement Charges, 1200-Government Recording and Transfer Charges, 1100-Title Charges, 1000-Reserves Deposited with Lender, 900-Items Required by Lender to be Paid in Advance, 700-Total Sales/Broker’s Commission on Price, and 800-Items Payable in Connection with Loan. Before signing any closing document, make sure to carefully review each of these items in this section. In order to make sure that you understood all the charges stated in this section, prior to closing, ask any questions. If you stop and think about it, it is better to prevent than lament.

As you can already conclude, a HUD-1 Settlement Statement is a form whose usage has become very standard in the United States of America. It is utilized to itemized fees and services that are charged to the borrower by the broker or lender when applying for a loan for the purpose of refinancing or purchasing real estate.
The most common errors that occur on HUD-1 Settlement Statement have to do with the mortgage loan and a couple of charges that are associated with it. These types of errors are easy to correct. Settlement agents can conduct changes even during the actual closing, as it can easily be performed with the use of a pen. Regardless of who the agent is, a HUD-1 Settlement Statement form goes through many layers of review before the closing of a home. When errors on a HUD-1 are identified, settlement agents are responsible for conduct the necessary corrections in order to avoid issues in the long run that can negatively affect all parties that are involved in the transaction.

Ultimate Statement Responsibility

Buyers and sellers are the ones who are responsible for reviewing their HUD-1 Settlement Statement form in order to ensure that it is accurate. Before the end of closing, every error found must be corrected. Until every question that relates to the HUD-1 Settlement Statement has been satisfactorily answered, no seller or buyer is obligated to complete a closing. Alongside his or her loan officer, the HUD-1 needs to be especially reviewed by the buyer before the closing of a home purchase or mortgage loan. Comparing the mortgage loan documents to the HUD-1 Settlement Statement will prevent the buyer from obligation to loan terms that are incorrect.