Explanation of HUD-1 Settlement Sheet

Closing Costs - A detailed explanation of the HUD-1 Settlement Statement

What is the HUD-1 Settlement Statement?

This is the paperwork used in your closing that will itemize the costs of all of the services provided to you and the fees associated with them. One business day before the settlement, you have the right to inspect the HUD-1 Settlement Statement. This form is filled out by the settlement agent who will conduct the closing. Be sure you have the name, address, and telephone number of the settlement agent if you wish to inspect this form.

Here is an explanation of some terms and costs on the sheet.

Sales/Broker's Commission - This is the total dollar amount of the real estate broker's sales commission, which is usually paid by the seller. This commission is typically a percentage of the selling price of the home.

Items Payable in Connection with Loan - These are the fees that lenders charge to process and approve the mortgage loan.

Items Required by Lender to Be Paid in Advance

You may be required to prepay certain items at the time of settlement, such as accrued interest, mortgage insurance premiums and hazard insurance premiums.

Escrow Account Deposits (Reserves Deposited with Lender)

These lines identify the payment of taxes and/or insurance and other items that must be made at settlement to create an escrow account. The lender is not allowed to collect more than a certain amount. The individual item deposits may overstate the amount that can be collected. The aggregate adjustment makes the correction in the amount on line 1008. It will be zero or a negative amount. The following items are contained in this section:

Title Charges

Title charges may cover a variety of services performed by title companies and others. Your particular settlement may not include all of the items below or may include others not listed.

Government Recording and Transfer Charges

These fees may be paid by either the buyer or the seller, depending on the arrangement that is made. Includes fees to legally record the new deed and mortgage, transfer taxes and any state tax stamps that may be purchased.

Additional Settlement Charges

Total Settlement Charges

The sum of all fees in the borrower's column entitled "Paid from Borrower's Funds at Settlement" is placed here.

Paid Outside Of Closing ("POC")

Some fees may be listed on the HUD-1 to the left of the borrower's column and marked "P.O.C." Fees such as those for credit reports and appraisals are usually paid by the borrower before closing/settlement. They are additional costs to you. Other fees such as those paid by the lender to a mortgage broker or other settlement service providers may be paid after closing/settlement. These fees are usually included in the interest rate or other settlement charge. They are not an additional cost to you. These types of fees will not be added into the total.

Adjustments To Costs Shared By Buyer and Seller

At settlement it is usually necessary to make an adjustment between buyer and seller for property taxes and other expenses. For example if a seller lived in the property for half of the year and you were going to have it for the other half of the year, an adjustment would be made so the buyer would pay their portion of the tax and the seller would pay their part. Similar adjustments are made for homeowner association dues, special assessments, and fuel and other utilities, although the billing periods for these may not always be on an annual basis. Be sure you work out these cost sharing arrangements or "prorations" with the seller before the settlement. You may wish to notify utility companies of the change in ownership and ask for a special reading on the day of settlement, with the bill for pre-settlement charges to be mailed to the seller at his or her new address or to the settlement agent. This will eliminate much confusion that can result if you are billed for utilities used when the seller owned the property.

For more information and to see an example of a HUD-1 Sheet visit www.alta.org/consumer/hud1.cfm