HUD is an acronym for the U.S. Department of Housing and Urban Development. However, when mortgage professionals refer to the HUD, they are referencing the HUD-1 settlement statement. It’s a document that you should get to know and understand before you go to your closing.
So, what exactly is a HUD-1 settlement statement?
Regulated by the department of Housing and Urban Development, the HUD-1 form itemizes the closing costs associated with a home purchase or loan refinance. To see an official blank form, click here.
What is the “Good Faith Estimate”?
As you scroll through the form, you may notice a column labeled Good Faith Estimate (GFE) on the last page. This is where the HUD-1 compares the final loan fees to the original GFE. The GFE is provided at during loan negotiation with the lender, but fees might fluctuate if loan amounts change during the mortgage process.
What should I look for?
Although it’s important to thoroughly read any HUD-1 statement, here are a few quick hits of information:
Funds due at closing
Take a look at lines 303 and 603 of the form to see the funds or cash disclosure due at the closing for the seller (if it’s a purchase transaction) and borrower. You will find that either you owe money OR that you will be receiving loan proceeds disbursed by the lender after the closing.
Title fees for an owner's policy and a lender's policy will be located in the 1100 lines. Title fees are state regulated and will vary according to the subject property’s location.
Appraisal fees are located in the 800 lines categorized as Items Payable in Connection with Loan.
The Real Estate Settlement Procedures Act (RESPA) is a federal law that gives consumers the right to review information about loan settlement costs after you apply for a loan and again at loan settlement. RESPA guidelines oblige lenders to provide these disclosures at various times in the transaction. As part of RESPA regulations, this procedure helps to regulate the cost of settlement services for consumers and ensure accurate loan fee estimates. If there is a lender credit due to RESPA cure, it will be located in the 200 section of the HUD-1.
Look at the fees in a section on the last page of the HUD called Charges that Cannot Increase . The lender will cover extra fees via the RESPA Cure if:
· Fees listed are greater than what was disclosed on the GFE
· Fees in the section called Charges that Cannot Change Above 10% are indeed 10% greater on the HUD than what was disclosed on the GFE
Any questions or comments? Please let us know!