The HUD-1 is a form used by the settlement agent (also called the closing agent) to itemize all charges imposed upon a borrower and seller for a real estate transaction. It gives each party a complete list of their incoming and outgoing funds.Fees associated with the transaction but paid prior to closing are also included on the HUD. They are normally marked “POC,” for Paid Outside of Closing.
RESPA states you should be given a copy of the HUD-1 at least one day prior to settlement (Ha, ha). In the real world, unfortunately, what they give you the day prior could be thousands of dollars different than what it looks like at the closing table. And don’t assume that the Good Faith Estimate (GFE) given to you by the lender at the approval or application for a loan is in any way close to accurate. Many lenders conveniently “neglect” to mention certain settlement costs, like state and municipal filing fees, as well as some of their associated costs.
When comparing between two lenders, the most important lines to consider are 700, 800, & 900-series. The lines in these sections detail the costs that change from lender to lender. In other words, this is also where you will see most of their profits and commissions for the brokers.
Section 700, Agency Commissions
This section deals with the commission paid to real estate agencies. Lines 701 and 702 show how commissions are split between two participating agencies.
Commissions are usually paid from the seller’s funds. However, a buyer’s agent who sells a for-sale-by-owner home may be paid by his or her 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 in some cases sellers agree to pay specified amounts to help the buyer close.
Line 801 shows the fee the lender charged for processing or originating the loan. If the fee is a percentage of the loan amount, the percentage will be stated.
Line 802 is used to record the “points” charged by the lender. Each point is 1% of the loan amount.
Line 803 is used to record appraisal fees. You may have paid the fee when you applied for the loan. If so, it should be marked “POC,” for paid outside of closing. The amount would be shown, but would not be included in the total fees you bring to settlement.
Line 804 is used to record the cost of the credit report if it is not included in the Origination Fee.
Line 805 includes charges for inspections done at the request of the lender. Other pest 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 to 811 are used for miscellaneous items connected with the loan, such as fees paid to a mortgage broker.
Items Required by Lender to be Paid in Advance
These charges are typically paid by the buyer. They are all items which the lender requires, but which are not always paid to the lender.
Line 901 is used to record interest that is collected at settlement for the time period between closing and the first monthly payment.
Line 902 shows mortgage insurance premiums that are due at settlement. Escrow reserves for mortgage insurance are recorded later. If your mortgage insurance is a lump sum payment good for the life of the loan it should be noted.
Line 903 is used to record hazard insurance premiums that must be paid at settlement in order to have immediate insurance on the property. It is 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.
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 varies, but there are limits as to how much the lender can collect.
The borrower paid current charges for the expenses in Section 900. The entries on lines 1001-1007 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 is not 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 an attorney for the lender. Other items covered in this section are fees for closing agents and notaries. When one person performs many tasks fees may be lumped together. Line 1101 is used to record the settlement agent’s fee.
The fees for the abstract or title search and examination are entered in lines 1102 and 1103. If the same person performs both duties, a lump sum will be entered in line 1103. If the person doing the work is a title company or attorney, charges are entered later, in lines 1107 or 1108.
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, and such bills 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 an attorney’s 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 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 & 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. If either party is buying a home warranty, the charge will be entered in this section.
Line 1400 is for the total settlement charges paid from borrower’s and seller’s funds. They are also entered in Sections J and K, lines 103 and 502.