UNDERSTANDING THE SETTLEMENT SHEET AND CLOSING DISCLOSURE

A real estate transaction involves a series of exchanges, not only between the buyer and seller, but also with lenders, brokers, and state and local governments. The settlement statement, or HUD-1 accounts for all of these exchanges, totaling the credits and debits to buyer and seller. It is designed to make a complex series of steps as simple and clear as possible. Despite these efforts, the HUD-1 presented to the parties at the closing table is often confusing to the parties involved. At Maryland Trust Title, we will do our best to make certain that you understand the HUD-1 Settlement Statement [108Kb PDF] and Closing Disclosure and the full details of the real estate transaction.

HUD – 1 Layout

The HUD-1 consists of 3 pages. Page 1 lays out the overall settlement transaction with the Buyer's transaction being shown on the left side and the Seller's transaction being shown on the right side. The HUD-1 is structured this way in order to ensure that all funds are properly accounted for and that the transaction balances. In other words, “money in should equal money out!

Page 2 of the HUD-1 details the settlement expenses for the Buyer and Seller. Again, the settlement costs of the Buyers are shown on the left hand column and the settlement costs of the Sellers are shown on the right hand column. The total of the Buyer's settlement expenses, shown on Line 1400, are brought over to Line 103 on Page 1 of the HUD-1 to be included in the calculation of the overall Buyer's transaction. The total of the Seller's settlement expenses, shown on Line 1400, are brought over to Line 502 on Page 1 of the HUD-1 to be included in the calculation of the overall Seller's transaction.

Page 3 of the HUD-1 is where the comparisons and GFE tolerances are laid out.  They are separated into three sections.  The first section is for charges that cannot increase.  The second is for items that cannot increase more than 10%.  The third section is for charges that can change at closing.  Also on page 3 are the loan terms and this is where you will find all specific information about your loan such as interest rate, loan terms, and if you have a balloon  or repayment penalty. This is a wonderful tool for the buyer/borrower to understand the specifics of the transactions all on one page.

Each Section and Line of the HUD-1 are numbered for easy reference. A line by line description of the HUD-1 contents is provided at each of the links below.

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