The HUD-1 Settlement Statement

Understanding the HUD-1 Form and When It Is Used

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The HUD-1 Settlement Statement is a standard government real estate form that was once used by settlement agents, also called "closing agents," to itemize all charges imposed upon a borrower and seller for a real estate transaction.

The statement is no longer used, with one exception: reverse mortgages. It was originally developed by the U.S. Department of Housing and Urban Development (HUD) to give each party a complete list of their incoming and outgoing funds. 

Key Takeaways

  • The HUD-1 Settlement Statement was the standard statement used to itemize all charges for buyers and sellers in a real estate transaction until 2015.
  • It is still used in reverse mortgages, loan transactions that allow sellers to pull equity out of their home.
  • Since October 2015, the Closing Disclosure has replaced the HUD-1 for most real estate closings.

When Was the HUD-1 Used?

The Real Estate Settlement Procedures Act (RESPA) required that the HUD-1 form be used as the standard real estate settlement form in all transactions in the United States that involved federal mortgage loans.

It was formerly used for nearly all transactions that involved a buyer and seller, including cash closings

You would have received a HUD-1 statement if you applied for a mortgage on or before October 3, 2015. Borrowers began receiving a form called the Closing Disclosure instead of a HUD-1 for most kinds of mortgage loans after October 2015.

The change was in response to the TILA RESPA Integrated Disclosures, or simply TRID, which overhauled the way mortgages are processed and disclosed.

When Is a HUD-1 Used in 2020?

The HUD-1 settlement statement is still used in 2020 for reverse mortgages. These types of mortgages are very popular with sellers over the age of 62 who want to pull equity out of their homes.

Lenders will also often ask for a copy of an old HUD-1 to prove the date the property closed during the three- to 10-year period following a short sale prior to 2015.

When Is the HUD-1 Distributed?

Before October 3, 2015, RESPA stated that borrowers should be given a copy of the HUD-1 at least one day prior to settlement. However, entries could easily still be coming in, right up until a few hours before closing.

Most buyers and sellers studied the statement on their own, with the assistance of their real estate agent and the settlement agent. The idea was that the more people who reviewed it, the more likely it became that errors would be detected.

Don't assume that the closing agent is always correct, whether you're dealing with the HUD-1 or the Closing Disclosure. Mistakes can and do happen, and errors can be found at the last minute. Ask as many questions as necessary to help you understand all charges.

Overview of the HUD-1 Form

This line-by-line summary covers the most critical sections of the form. And yes, there are a lot of lines.

Section L, Settlement Charges: Lines 700-1400

Many entries are tabulated before being brought forward to page 1 in Section L or page 2. Columns contain charges that are paid from either the borrower's or the seller's funds. Your closing statement probably won't have entries in all these lines.

Section 700, Agency Commissions

This section deals with the commissions paid to real estate agencies. Lines 701 and 702 show how the commissions are split between two participating agencies.

Commissions are usually paid from the seller's funds, but a buyer's agent who sells "for sale by owner" home might be paid by their client, not the seller.

Section 800, Items Payable in Connection with Loan

The entries on these lines are most often paid from the buyer's funds, although sellers might agree to pay specified amounts to help the buyer close in some cases.

  • Line 801 shows the fee the lender charged for processing or originating the loan. The percentage will be stated if the fee is a percentage of the loan amount.
  • Line 802 records the "points" charged by the lender. Each point is 1% of the loan amount.
  • Line 804 is used to record appraisal fees. You might have paid these when you applied for the loan. If so, it should be marked POC, for paid outside of closing. The amount would be shown, but it would not be included in the total fees you bring to settlement.
  • Line 805 is used to record the cost of the credit report if it's not included in the origination fee.
  • Line 805 also includes charges for inspections done at the request of the lender. Other pests and structural inspections are recorded in another area.
  • Line 806 is for an application fee that might be required by a private mortgage insurance (PMI) company.
  • Line 807 is only used for loan-assumption transactions where the buyer takes over the seller's existing mortgage.
  • Lines 808 through 811 are used for miscellaneous items connected with the loan, such as fees paid to a mortgage broker.

Section 900, Items Required by Lender to be Paid in Advance

These charges are typically paid by the buyer. They're all items the lender requires, but which are not always paid to the lender.

  • Line 901 is used to record interest that's collected at settlement for the time period between closing and the first monthly mortgage payment.
  • Line 902 shows mortgage insurance premiums that are due at settlement. Escrow reserves for mortgage insurance are recorded later. It should be noted here if your mortgage insurance is a lump sum payment that's good for the life of the loan.
  • Line 903 is used to record hazard insurance premiums that must be paid at settlement to have immediate insurance coverage on the property. It's not used for insurance reserves that will go into escrow.
  • Lines 904 and 905 are for miscellaneous items such as flood insurance, mortgage life insurance, credit life insurance, and disability insurance premiums.

Section 1000, Reserves Deposited with Lender

This section is used to itemize escrow funds collected by the lender from the borrower for such things as hazard insurance and property taxes. The number of months charged can vary, but there are limits as to how much the lender can collect.

Current charges for the expenses paid by the borrower appear in Section 900. The entries on lines 1001 through 1007 are for funds used to start the borrower's escrow account, from which the lender will pay next year's premiums.

Each mortgage payment includes an amount that covers a portion of these recurring expenses.

Line 1008 is an escrow adjustment calculated by the settlement agent by comparing different escrow formulas. This step is to make sure the lender isn't collecting more escrow funds than are allowed.

The figure is always zero or a negative number.

Section 1100, Title Charges

Title charges include fees directly related to the transfer of title, such as the title examination, title search, document preparation, and fees for the title insurance policy. They are normally charged to the buyer.

Legal fees include fees for both the borrower's and seller's attorneys, and sometimes for an attorney for the lender. Other items covered in this section are fees for closing agents and notaries.

Many tasks fees can be lumped together when one person performs several of them.

  • Line 1101 is used to record the settlement agent's fee.
  • The fees for the abstract or title search and examination are entered on lines 1102 and 1103. A lump sum will be entered in line 1103 if the same person performs both duties. Charges are entered later, on lines 1107 or 1108, if the person doing the work is a title company or attorney.
  • Line 1104 shows charges for the title insurance binder, also called a commitment to insure. Payment for title insurance policies is entered later.
  • Line 1105 records charges for deed preparations, as well as work on mortgages and notes.
  • The fee charged by a notary public for authenticating the execution of the settlement documents is entered on line 1106.
  • Line 1107 discloses attorneys' fees.
  • Line 1108 is the cost of title insurance, except the cost of the binder.
  • Lines 1109 and 1110 are informational lines that disclose the costs for the separate title insurance policies for borrower and lender. Only line 1108 is carried forward.
  • Lines 1111 to 1113 are used to enter other title-related charges, which can vary by location. Entries might include a fee to a county tax collector for a tax certificate or a fee to a private tax service.

Section 1200, Government Recording and Transfer Charges

This section is used to itemize charges such as costs for recording deeds and mortgages and fees for tax stamps.

Sections 1300 and 1400, Additional Settlement Charges and Totals

Section 1300 is used to record survey fees and inspections for such things as pests, lead-based paint, and radon. Structural inspections and inspections for heating, plumbing, or electrical equipment might also be included. The charge will be entered in this section if either party is buying a home warranty.

Line 1400 is for the total settlement charges paid from borrower's and seller's funds. They're also entered in Sections J and K, lines 103 and 502.

Section J Summary of Borrower's Transaction: Lines 100-303

You'll find sections J and K back on page 1 of the HUD-1 form. They outline the borrower's and seller's itemized transactions.

Section 100, Gross Amount Due from Borrower

  • Line 101 states the gross sales price of the property.
  • Charges for personal property such items as draperies, washer, dryer, outdoor furniture, and decorative items being purchased from the seller are listed on 102.
  • Line 103 shows the total settlement charges to the borrower that are brought forward from Line 1400.
  • Lines 104 and 105 are for amounts owed by the borrower or previously paid by the seller.
  • Entries charged to the borrower include a balance in the seller's escrow account if the borrower is assuming the loan. The borrower might owe the seller a portion of uncollected rents.
  • Lines 106 through 112 are for items that the seller has paid in advance. For example, the buyer must reimburse the seller for his prorated portion of county taxes if the seller paid an annual bill. Each person pays charges associated with the time they owned the property.
  • Line 120 is the gross amount due from the borrower. It's the total of lines 101 through 112.

Section 200, Amounts Paid by or on Behalf of Borrower

These are all entries for funds the borrower will receive at closing.

  • Line 201 gives the buyer credit for the amount of earnest money paid when the offer was accepted.
  • Line 202 is the amount of the new loan, which is being paid to the borrower by the lender.
  • Line 203 is used when the borrower is assuming a loan or otherwise taking title subject to an existing loan or lien on the property.
  • Lines 204 through 209 are used to list miscellaneous items paid by or on behalf of the buyer. They can include such items as an allowance the seller might be making for repairs or replacement of items. This area is also used when the seller accepts a note from the borrower for part of the purchase price.
  • Lines 210 through 219 are for bills that the seller has not yet paid but owes all or a portion of. Taxes and assessments are listed here, but the area might also include rents collected in advance by the seller for a period extending beyond the settlement date.
  • Line 220 is the total for all items in Section 200. The total is added to the borrower's proceeds.

Section 300, Cash at Settlement From/To Borrower

This basically summarizes what money will change hands at closing.

  • Line 301 is a summary of the total amount due from the borrower.
  • Line 302 is a summary of all items already paid by or for the borrower.
  • Line 303 is the difference between lines 301 and 302. It most often shows how much money the borrower must bring to closing. A negative number indicates that the borrower will receive funds back at closing.

Section K, Summary of Seller's Transaction: Lines 400-603

This section appears to the right of section J, the Summary of the Borrower's Transaction. It summarizes the transactions of the seller.

The amounts in Section 400, Gross Amount Due to Seller, are added to the seller's funds.

  • Line 401 states the gross sales price of the property.
  • Entries for personal property, such items as draperies, washer, dryer, outdoor furniture, and decorative items that the seller may be selling to the buyer are listed on line 402.
  • Lines 404 and 405 are for other amounts owed by the borrower or previously paid by the seller. They might include reimbursements for the balance in the seller's escrow account if the borrower is assuming the seller's loan, or the buyer may owe the seller a portion of uncollected rents.
  • Lines 406 through 412 are for items that the seller has paid in advance. For example, the buyer might have to reimburse the seller for a prorated portion of county taxes if the seller paid an annual bill but won't own the property during that entire year.
  • Line 420 is the gross amount due to the seller. It's the total of Lines 401 through 412.

Section 500, Reductions in Amount Due to Seller

The amounts in this section are subtracted from the seller's funds.

  • Line 501 is used when the seller's real estate broker or another party holds the borrower's earnest money deposit and will pay it directly to the seller.
  • Line 502 contains the figure from line 1400, the seller's total charges as computed in Section L.
  • Line 503 is used if the borrower is assuming or taking title subject to existing liens that are deducted from the sales price.
  • Lines 504 and 505 are for any first or second loans that will be paid off as part of a settlement, including accrued interest.
  • Lines 506 through 509 are shown as blank lines. They're reserved for miscellaneous entries.
  • Line 506 is used to record deposits paid by the borrower to the seller or to another party who isn't the settlement agent. This is slightly different from the entry in 501. In this case, the party holding the funds transfers it to the settlement agent to be disbursed at closing.

These lines can also be used to list additional liens that much be paid at settlement to clear title to the property.

  • Lines 510 through 519 are for bills that the seller has not yet paid but owes all or a portion of. Taxes and assessments are listed here, but the area might also include rent collected in advance by the seller for a period extending beyond the settlement date.
  • Line 520 is the total for all items in Section 500. The total is deducted from the seller's proceeds.

Section 600, Cash at Settlement to or from the Seller

This section details the cash the seller will either receive or pay at closing.

  • Line 601 is the gross amount due to the seller, transferred from line 420.
  • Line 602 contains the total of reductions in seller's proceeds, transferred from line 520.
  • Line 603 is the difference between lines 601 and 602. It usually indicates a cash amount paid to the seller, but it's possible for the seller to owe money at closing. For example, the seller might owe more on first and second mortgages than is recovered in the contract.

This is one of the closing documents that you should keep if you receive a HUD-1 as part of your reverse mortgage transaction. The same applies to the closing disclosure in any other real estate sale or purchase.