Understanding the HUD-1 Settlement Statement

The HUD-1 Settlement Statement is crucial in real estate transactions, specifically for homebuyers and sellers. It itemizes all charges and credits to the buyer and seller in a real estate settlement or closing. Although its usage has decreased in recent years due to regulation changes, understanding the HUD-1 form remains essential for those involved in real estate transactions. This blog post will explore the HUD-1 Settlement Statement, its components, and its significance.

What is the HUD-1 Settlement Statement?

The HUD-1 Settlement Statement, often referred to simply as the HUD-1, was a standard form used to itemize services and fees charged to a borrower by the lender or broker when applying for a loan for purchasing or refinancing real estate. It was required for most transactions involving federally related mortgage loans. However, as of October 2015, the HUD-1 has been replaced by the Closing Disclosure form for most types of mortgages, except for reverse mortgages and a few other types of loans.

Critical Components of the HUD-1

The HUD-1 is a detailed document that includes the following key sections:

General Information:
- Basic details include the property address, buyer and seller names, settlement agent, and closing date.
Summary of Borrower’s Transaction:
- Section J: This section lists the borrower’s charges, including the loan amount, deposits, and total settlement charges.
Summary of Seller’s Transaction:
- Section K: This section itemizes the seller’s charges, including the sale price, payoff of existing loans, and total settlement charges.
Settlement Charges:
- Section L: This is the heart of the HUD-1, detailing all fees involved in the transaction. It includes categories like loan origination fees, appraisal fees, credit report fees, title insurance, and government recording fees.
Additional Information:
- Includes disclosures about the loan terms, the yield spread premium, and other financial details related to the loan.

Why is the HUD-1 Important?

The HUD-1 Settlement Statement serves several critical purposes:

Transparency: It provides a clear, itemized list of all transaction costs, ensuring that buyers and sellers understand exactly where their money is going.
Legal Compliance: It helps ensure compliance with the Real Estate Settlement Procedures Act (RESPA), which aims to protect consumers by requiring disclosures about the costs of closing a real estate transaction.
Financial Planning: By detailing all expenses, the HUD-1 helps buyers and sellers prepare for the transaction’s financial impact and avoid surprises at closing.

Transition to the Closing Disclosure

As part of the Consumer Financial Protection Bureau’s (CFPB) “Know Before You Owe” initiative, the HUD-1 was replaced by the Closing Disclosure form for most types of mortgages. The Closing Disclosure is designed to be more user-friendly and provides similar information in a more straightforward format. It must be provided to the borrower at least three business days before closing, giving them more time to review the costs and terms of their loan.

Conclusion

The HUD-1 Settlement Statement was essential in the real estate transaction process, providing detailed information about all costs and charges. While it has mainly been replaced by the Closing Disclosure for most mortgages, understanding the HUD-1 remains valuable, especially for reverse mortgage transactions. Whether you are a buyer, seller, or real estate professional, being familiar with the components and purpose of the HUD-1 can help ensure a smoother, more transparent closing process.

In summary, the HUD-1 represents a vital tool in real estate transactions, emphasizing the importance of transparency and financial clarity in buying or selling a home.

Provider and Settlement Service	Charge or Range of Charges
Sonic Realty LLC	1%-6% of purchase price
Sonic Title Agency, LLC	Title Insurance Policy: $950 - $1706 on a $250,000 property. (Rates vary and are dependent on the state, selling price, and loan amount on the property.) Title Search Fee: $250 - $325 (where applicable) Closing Fee: $450 - $650
Sonic Loans Inc. This company provides various real estate mortgage loan origination activities either as a third-party originator or a mortgage broker, including loan pre-qualification, competitive bid process (when providing third-party origination services), loan origination, loan pre-approval, loan structuring, processing, and closing.	Loan Origination Charge: 0-3 % of loan amount (may include 3^rd party fees) Loan Discount Fee/points: 0.5%-6% of loan amount. Application/Processing Fee: $0.00 - $875.00 Flood and tax service: $0.00 - $95.00 Underwriting Fee: $0.00 - $1295.00 Document Review Fee: $0.00 - $400.00 Appraisal Fee: $0.00 - $850.00 Credit Report Fee: $0.00 - $135.00 Actual charges may vary according to the particular lender selected, the particular services provided, and the underlying transaction, borrower selections, etc. Some or all of these fees may be charged by third parties and/or the Member Mortgage Lender/Mortgage Broker. The Member Lenders and Mortgage Brokers have agreed to pay a fee ranging from 0.5% to 2.75% of the loan amount to Sonic Loans in connection with a range of loan origination services provided by Sonic Loans to the Member Lender/Mortgage Broker. The fees are paid either directly to Sonic Loans by the Member Lender/Mortgage Broker or billed directly to you at closing.

Provider and Settlement Service	Charge or Range of Charges
Appraisal Fee	$0-$800
Credit Report Fee	$63-$125