It’s been a long summer break since we’ve had a new Know Your Mortgage blog, so it’s probably time we get back in session. Don’t fret – just like school, a blog about mortgages can be fun. Mortgages even come with their own version of a report card. That might scare you away, but the mortgage equivalent of a report card, or the HUD-1, shouldn’t. It’s a helpful tool to show what you owe at closing and it’s this week’s topic.
What Is a HUD-1?
A HUD-1 is an itemized statement that tells you how much money you need to bring to closing, or what you’ll be getting back, depending on your loan conditions. It’s required by RESPA, an act from the Department of Housing and Urban Development (hence the “HUD” part of it) but the HUD-1 can also be called the Settlement Statement, Closing Statement or the Settlement Sheet.
Are a HUD-1 and a Good Faith Estimate the Same Thing?
No, but a Good Faith Estimate (GFE) gives you an estimate of what to expect on your HUD-1 and has been a required part of it since 2010. Your HUD-1 contains final numbers on things covered in your GFE, including other costs that are broken across three pages and multiple sections. There are many intricate parts to the HUD-1 that create your total amount, with the fees and the legal-ese growing as the document goes on. It’s all important – the whole reason the HUD-1 is here is to make sure the borrower is getting a fair look at what they could be paying. It’s also important to mention that a Good Faith Estimate is just that – an estimate – while your HUD-1 is solid in the amounts listed.
What Makes Up a HUD-1?
Your costs will be shown across multiple sections in the HUD-1, and are broken down into numbered sections like this:
- 100 – Gross Amount Due From Borrower
- 200 – Amount Paid by or in Behalf of Borrower
- 300 – Cash at Settlement from/to Borrower (This section is the difference between sections 100 and 200)
- 400 – Gross Amount Due to Seller
- 500 – Reductions in Amount Due to Seller
- 600 – Cash at Settlement to/from Seller (The difference between sections 400 and 500)
These first sections are your number crunchers, and they show who will be paying whom at closing and the math behind it. As we move on the sections get more specific, but still straightforward:
- 700 – Total Real Estate Broker Fees
- 800 – Items Payable in Connection with Loan (Stuff from your GFE like appraisal fee, flood certification and more)
- 900 – Items Required by Lender to be Paid in Advance
- 1000 – Reserves Deposited with Lender (For escrow, insurance and taxes)
- 1100 – Title Charges
- 1200 – Government Recording and Transfer Charges
- 1300 – Additional Settlement Charges (Miscellaneous fees)
Finally there’s section 1400 which is your total settlement charges, which is the sums of all the sections added together. Keep in mind most of this is already on your GFE, but finalized. It’s important not to be intimidated by the serious-looking settlement statement. It’s there to help you and is just an extensive summary of your final steps towards homeownership. If you have any lingering questions regarding the HUD-1 AKA your settlement statement, please comment below.
Special thanks to Jonathan Guidry for his HUD-1 expertise and advice for this blog.