Amy Fontinelle – Forbes Advisor
The US Department of Housing and Urban Development (HUD) has created a variety of standardized forms for use in certain mortgage transactions and HUD programs. A common HUD form is the HUD-1 Settlement Statement, which was previously used for a few types of mortgage products, but is now only used for reverse mortgages.
If you’re wondering what a HUD-1 settlement statement is and what it means, here’s what you need to know.
What is a HUD-1 form?
A HUD-1 form (also called a HUD-1 settlement statement) lists all the costs you pay and credits you receive when you take out a loan, including how much the lender charges you to issue your loan, how much you paid to have your home appraised and more. While this form was formerly used for mortgages applied for on or before October 3, 2015, it is now limited to reverse mortgage transactions.
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If you take out a home equity conversion mortgage (HECM), the most common type of reverse mortgage backed by the Federal Housing Administration (FHA) – your HUD-1 will contain information on the selling price of the home, the realtor’s selling commission, property taxes owed, and any deposits you have deposited. The form will also show how your final settlement costs compare to the estimated costs your lender gave you on the Good Faith Estimate (GFE) form when you applied for your reverse mortgage.
Note that for transactions that do not include a seller (such as mortgage refinance), your lender may use a HUD-1A form instead. It is simply an abbreviated version of the HUD-1 which omits the sections relating to selling fees.
What does a HUD-1 settlement statement look like?
A HUD-1 settlement statement is a three-page form. Here’s what you’ll find on each page:
This page contains your personal information, property information, and a detailed list of buyer’s and seller’s costs if the property changes hands.
This page includes the real estate broker’s fees (if applicable) and a detailed list of all your closing costs. While it’s rare to see a HUD-1 form in a buy and sell transaction, here are some of the loan fees the form could cover, broken down by section.
- Section 800: Here you will see the lender assembly costs and any discount points you agreed to pay for a lower interest rate. You will also see several third-party charges for your home appraisal, credit report, flood certification and tax service. This fee covers the professional opinion of your home’s value as well as the lender’s review of your credit reports and scores.
- Item 900: You will owe a certain amount of interest on your loan to cover the closing day until the end of the month. The “Daily interest charge” line shows the daily cost and the total cost you will owe your lender. The next line is for mortgage insurance premiums, which anyone who takes out a federally insured reverse mortgage must pay. The third line in this section is for home insurance premiums you must pay at closing.
- Item 1000: In a traditional purchase transaction where you pay less than 20% of the purchase price of the home and the lender asks you to maintain a escrow account, this section indicates how much you need to fund this account in advance. With a reverse mortgage, instead of paying for these items out of pocket, money could be withheld from your loan proceeds. This section indicates the amount that would be withheld each month for home insurancemortgage insurance premiums and property taxes.
- Item 1100: You’ll need to pay for your lender’s title insurance policy, and it might be a good idea to purchase an optional owner’s policy as well. This section details those costs, which protect your lender (and you, if you’re buying a homeowner’s insurance policy) if someone tries to come in later and claims they have a legal interest in your home.
- Item 1200: The government registers real estate transactions so that people can assert their property rights, but this service is chargeable. Section 1200 tells how much you need to pay to create an official document that your lender is interested in your home and that you own it.
This page includes a summary of how the GFE form compares to the closing costs your lender asks you to pay to finalize the loan, as well as key details about the terms of your loan.
- Comparison of GFE and HUD-1 loads: Having a good understanding of the fees shown on page 2 will help you understand this comparison section more easily. It’s also a good idea to grab your copy of the GFE form you received to make sure the numbers match. Keep in mind that there may be changes between the dollar amounts on your GFE form and HUD-1, but only certain items may change, and they cannot vary by more than 10%.
- Loan conditions : This section covers what you are legally agreeing to, such as the amount you are borrowing, your repayment term, the interest rate, whether your rate can change, and whether the loan has certain features (such as negative amortization or a lump sum payment). You’ll also see detailed monthly costs if your lender pays your property taxes, home insurance, or flood insurance premiums on your behalf from the money they take out of your home equity.
Frequently Asked Questions (FAQ)
When should I receive the HUD-1 settlement statement?
The law requires that your lender give you the HUD-1 settlement statement no later than the business day before you close your loan, but only if you request it. If you don’t, the first time you see the form may be when you sign your closing documents.
You also have the option of waiving your right to see the settlement statement at closing and have it delivered or mailed to you as soon as possible after the trade is settled. However, that’s probably not a good idea. Instead, be sure to review what you’re being charged while you still have a chance to ask questions and resolve disputes before your loan closes, and while your lender still has the incentive to keep your company.
Also note that your lender is not obligated to show you the HUD-1 at or before closing if you do not attend settlement. So be sure not to skip it if you want to review all of your closing costs before you pay them. .
Where can I find my HUD-1 settlement statement?
If your loan is not yet closed, you can obtain your HUD-1 from your lender. If you have already closed, you should be able to find your HUD-1 settlement statement with your closing documents.