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The HUD-1 Settlement Statement

What is the HUD-1 Settlement Statement?

This is the document used at closing to itemize all charges associated with a home settlement loan.  It comes in during any transaction that involves a federally-backed loan.  It’s a standard form that’s required by HUD’s RESPA legislation (Real Estate Settlement Procedures Act).  

What does it cover?

In brief, the HUD-1 Settlement Statement will involve:

  • Settlement charges
  • Commissions paid to real estate agencies
  • Typical closing costs (appraisal fees, inspection, title search, broker’s fees, loan origination fees, etc)
  • Items required by lender (interest, homeowner’s insurance, mortgage life insurance, etc)
  • Reserves deposited by lender (mainly escrow-related)
  • Title charges
  • Recording/transfer charges (state, county, municipal)
  • Gross sale price of property
  • Gross amount due to lender
  • Reductions in amount due to lender (which will help calculate actual sale price).

A whole section of the settlement statement will refer to “POC” charges; that’s an abbreviation for costs “paid outside of closing.”  POC charges might include various “junk charges” payable to the mortgage company, but might also include a “yield spread premium” payable to your mortgage broker.  This is where the lender rewards the broker for arranging a fairly lousy loan with high interest rates.  Be watchful of POC charges on your HUD-1 Settlement Form!

This is a brief overview of a complicated form.  Don’t assume that your closing agent is correct!  Mistakes happen, and even though the home settlement loan form is supposed to be complete and accurate 24 hours before the closing, it’s not unusual for last minute changes to alter a home settlement loan mere hours before closing time.   Most buyers will review the statement with the seller, the settlement agent, the real estate agent and often an attorney.  The more eyes there are on the document itself, the more likely it is that mistakes will show up.  

Compare the HUD-1 Settlement Statement to the Good Faith Estimate provided by your broker or real estate agent, and be ready to start discussing any discrepancies that you might find.  It’s a complex and lengthy form, but there are resources available to help walk you through the process, including specialized HUD-1 Settlement Statement software on the Internet.  


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