Wednesday, October 19, 2011

How to read a HUD Settlement Statement

Buying, Selling or Refinancing a house?  You should be intimately familiar with the HUD-1 settlement sheet -- the document that is the road map to your transaction.

Here is a link to a complete HUD-1.  Below I have provided a step-by-step guide to each form on the HUD-1 so during your next real estate transaction, you will be well-versed in the details of the process.  Read the guide in conjunction with reviewing the actual HUD-1 form.

HUD 1 - Page One

Sections 100 & 400:

Lines 101/401 Sales price as stated on the Agreement of Sale - This is the number that will be used to calculate realtor fees and transfer taxes.

Line 103 Total of buyers’ closing costs from Page 2, Line 1400 - You should always check the math and make sure the number is carried over correctly.

Lines 106-112 &
406-412 Pro-ration of taxes, sewer/trash rent, Condo/HOA, fees, etc. that have been pre-paid by the Seller.  Buyer is reimbursing the seller for prepaid items from the day of closing to the end of the taxing or payment period.  Always make sure the math is correct.

Lines 120 & 420 Total amount due from Buyer and due to Seller.

Sections 200 & 500:

Line 201 Total deposit (“down money”) credited to buyers at closing.  Make sure you receive credit for all of your deposits.

Line 202 New loan amount, as applied for by buyers with their new lender.

Lines 205-209 This section reports any credits made on the Buyers’ behalf, such as, cashiers/certified check from the buyers, second mortgages, closing costs credits from seller.

Lines 210-219 &
510-519 Pro-ration of taxes, sewer/trash rent, Condo/HOA fees, etc. that have not been pre-paid by the Seller.  These will be charged to the buyers at a later date.  Since they cover a portion of the time that the seller owned the property, the seller is responsible for that part of the total bill and pays them to the buyer.

Line 502 Total of Seller’s closing costs from Page 2, Line 1400.  Always check the math and make sure the number is carried over correctly.

Lines 504 & 505 Payoffs of Sellers’ mortgage liens against the property.  If you are the Seller, check these lines carefully and make sure they match the payoff numbers that you have received from your lender.

Lines 506-509 Additional charges due from seller, such as, Federal Express fees, repair bills, etc.

Lines 220 & 520 Total credits for the Buyers and total charges to the Sellers.

Lines 303 & 603 Total cash to/from buyers to total cash to/from sellers.


Section 700:

Lines 701 & 702 Commission paid to Seller/Listing Broker.  Check the math and make sure this number matches your agreed upon percentage in the original listing agreement.

Line 703 Total commission paid at settlement by seller/buyer.

Section 800:

Line 800-815 Fees due from the buyers’ lender.  These will usually consist of points, appraisal/credit report, document preparation, flood certification, tax service, and any other fees charged.  Go over these carefully - you may have already paid some of these directly so make sure you receive credit.

Section 900:

Line 901 Interest due from the buyer (if they are obtaining a loan), from the day of closing to the end of the month.

Lines 902-905 Premiums due from the buyer for mortgage insurance, homeowners’ insurance, and flood insurance, if any are applicable.

Section 1000:

Lines 1001-1008 All escrows as required by the buyers’ lender.

Section 1100:

Line 1106 Notary fees due from buyer/seller.

Line 1107 Attorneys fees, if applicable, charged by the buyers’ or sellers’ attorney.  You may also choose to pay your attorney directly, outside of settlement.

Line 1108 Title insurance due from the buyers.  In Pennsylvania, this is a filed rate as determined by the Pennsylvania Insurance Rating Bureau based on the sales price.  It can either be a basic rate, reissue rate, or new construction rate.  Make sure you are charged the appropriate rate.

Line 1111 Endorsements are additional insurance coverage required by the lender. If you have questions, go through these carefully with your lender.

Section 1200:

Line 1201 Recording fees to record the applicable documents in the county courthouse.  (Deed, Mortgage, Assignment, etc.)

Lines 1202 & 1203 Transfer tax due from buyer/seller.  Make sure you are charged the correct rate.

Section 1300:

Lines 1301-1308 Any miscellaneous fees due from either the buyer or seller, such as, termite inspection, conveyancing fee, home warranties, etc.

Line 1400 Total settlement charges for the buyer and seller which will be carried over to page one on lines 103 and 502, respectively.

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