Welcome to “What Is A HUD-1?”, a four-part series breaking down the settlement statement that’s used in a real estate transaction. The settlement statement, also known as the HUD-1, is your receipt – it’s an itemization of every penny associated with the sale or purchase, so if it’s money-related then it’ll be shown on the HUD-1. Each party (buyer and seller) or signatory will sign multiple copies of the HUD-1.

A quick note – HUD, which is short for the US Department of Housing and Urban Development, is a department in the federal government that oversees, among other things, housing, and includes departments like Freddie Mac, Fannie Mae, and the Federal Housing Administration.

Part One of the series covered a summary of the buyer’s expenses in the transaction, while Part Two covered a summer of the seller’s expenses. In Part Three, we’ll review the individual items that make up closing costs for both the buyer and the seller. If the expense is a buyer expense it’ll be identified with a B, if the expense is a seller expense it’ll be identified with a S.

•  (S) Line 703, Commission Paid at Settlement – this line shows any and all brokerage fees related to the sale of the real estate. AKA it’s how I get paid. (well, how my brokerage gets paid)
• (B) Line 801, Our Origination Charge – this shows the total lender fees associated with originating your loan(s).
• (B) Line 802, Your credit or charge (points) for the specific interest rate chosen – if there are any charges (or credits) associated with the loan, they’ll be shown here. A point equals 1% of the loan amount.
• (B) Line 803, Your adjusted origination charges – this is the sum of lines 801 and 802.
• (B) Lines 804-807 – these include additional fees related to the loan, like the appraisal fee, the credit report, the tax service, and the flood certification. If an item is paid outside of closing, as an appraisal often is, it’ll be shown here with a POC next to it.

Items Required by Lender to Be Paid in Advance

• (B) Line 901, Daily Interest Charges – interest is collected by the closing attorney (or settlement company) from the date of settlement through the end of the month, so interest for that time period is collected at the time of settlement.
• (B) Line 902, Mortgage Insurance Premium – if a loan, like an FHA loan, requires PMI, the amount paid to secure that loan will be reflected here.
• (B) Line 903, Homeowner’s Insurance – a lender is going to require that a borrower have homeowner’s insurance on the purchase. Typically a one-year premium is collected up front in order to establish the policy.

Reserves Deposited With Lender

• (B) Line 1001, Initial Deposit for your escrow account – this is the total of lines 1002-1011; if you choose to escrow (have a certain amount of your monthly mortgage payment set aside to pay taxes and insurance) with a lender, those amounts will be included here.
• (B) Line 1002, Homeowner’s (Hazard) Insurance – for a multitude of reasons, you need to have hazard insurance on any real estate you own. Your lender will collect a certain amount (usually two or three months worth) of your one-year insurance premium, and that total will be reflected here.
• (B) Line 1003, Mortgage Insurance – if your loan type requires mortgage insurance, a certain amount of that premium will be collected here.
• (B) Line 1004, Property Taxes – property taxes for both the county and local municipality are collected, on a prorated basis, and established here. Your lender will then use those reserves to pay tax bills as they come due.
• (B) Line 1011, Aggregate Adjustment – federal guidelines only allow certain amounts, or percentages, to be held in an escrow account at any given time. If the amounts collected exceed that limit, a credit will be shown here.

Title Charges

• (B) Line 1101, Title Services and Lender’s Title Insurance – the steps necessary to establish title, including the search and examination, subsequent documents, courier fees, and more), will be shown here.
• (S) Line 1102, Settlement or Closing Fee – a charge made to the seller by the closing attorney – or settlement company – handling the transaction.
• (B) Line 1103-1108, Title Insurance – if you have a loan, your lender is going to require that you have lender’s title insurance, and it’s going to be suggested that you’ll want to get owner’s title insurance, as well. These lines total the cumulative costs of that insurance.

Government Recording and Transfer Charges

• (B) Line 1201, Government Recording Charges – in the Commonwealth of VA, the charge for recording the deed and any accompanying mortgage(s) at the courthouse is currently $99. The specific breakdown of charges will be shown on line 1202. And no, the state will not be sending you a Christmas card to say “thanks for your purchase!”
• (B) Line 1203, Transfer Taxes – because the $99 recording charge on line 1201 isn’t enough, the buyer is also charged transfer taxes – a one-time tax on the sale of the property. The breakdown of those taxes are shown on lines 1204 and 1205.
• (S) Line 1206, Grantor’s Tax – while it’s not shown on the above HUD, a Grantor’s Tax is also charged to the seller for the sale of the property. The current rate is $1 per $1000 of either assessed value or sales price, whichever is greater. Sorry – still no Christmas card from the state to say thank you!

Additional Settlement Charges

• (B and S) Lines 1301-1305, Required Services That You Can Shop For – these items will be the total of a number of different line items, including things like surveys, pest inspections, additional courier fees, and more.

The total of all of these will be totaled, for both buyer and seller, on line 1400, and those amounts will be carried over to Page 1, where they’ll be on line 103 for the buyer, and line 502 for the seller.

In the final post, we’ll talk about the final page of the HUD-1, which shows a comparison between what the lender quoted, and what the actual amounts were.