Purchasing real estate requires massive paperwork to do. Fortunately for purchasers in the United States, a huge part of this paperwork is completed by lenders and agents who have to dive into every deal. One of the forms they usually provide is the HUD-1 Settlement Statement, developed by the US Department of Housing and Urban Development (or HUD).
This document demonstrates how much money a purchaser needs to transfer while covering their mortgage. Each expenditure item is listed in the template. Even though there are only three pages in the form, you can see over 60 items to fill out, including the real estate’s price, taxes, insurance price, loan terms, and others.
The form is created by creditors or agents responsible for the deal closure. Purchasers receive the filled-out template when it is ready. For some mortgage types, issuing this completed form to both parties is compulsory by law.
To avoid unexpected situations and incorrectly counted costs, purchasers are advised to check the document thoroughly once they get it and even hire a professional who will help them deal with the numbers and calculations.
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If you are the purchaser, our guide might help you understand what legal specialists include in the form when they create it. We would also like to remind you that you do not have to fill anything out, but it is crucial to figure the form’s content out in advance not to be misled and to avoid any possible faux.
If you are an agent who lacks experience, you can check our instructions below. Although they might seem a bit overly simplified, they contain the basics. But we also recommend consulting your colleagues or mentors at work before you deliver the prepared document to your clients and their lenders.
Initially, it would be best if you got the template to fill out. Because HUD is the author of the form, you can get it at their website. However, our form-building software is developed specifically for generating any legal templates you need, and we suggest you use it to get the document without leaving our guide. After you find the template, move to the completion steps below.
Outline the Deal Parties and Basic Info
The form’s pages contain various charts that you have to fill out. The first chart you will see consists of sections from A to I. These sections tell about the deal parties and settlement.
Choose the applicable loan type in the first field. Then, insert three numbers step by step: file number, loan number, and the number of the mortgage insurance case.
Read the note in box C. It warns you about the certain sums you will include in the form to inform the client but will not add them to the total amount to pay.
Write the names and full addresses of all three parties: borrower, seller, and lender. Define the real estate’s location (if there is no address yet, you must provide at least a postal code). Lastly, add the place and date of settlement alongside the agent’s name (your name).
Complete Summary for the Loaner and the Seller
There are two charts with the same lines: one for the borrower, another for the seller. You do not have to complete both of them: it is enough to complete the borrower’s part on their copy and the seller’s part on the other copy separately.
Add the contract sales price, personal property costs (if there is any tangible item sold separately), settlement charges (for the borrower only, taken from the next page). Define the taxes, amount paid by the borrower, and other figures entered in both charts for the borrower and the seller. There are also empty lines you can use if you have additional relevant points to include.
If you have any concerns regarding the numbers you should write, remember to consult with your colleagues or HUD personnel. The Department also offers its instructions on the form.
Enter the Settlement Charges
Then, you must include the fees for the deal settlement: real estate agent fees in total, payable items tied to the loan, items required by the creditor (that loaner must pay in advance), sums to pay for the government recording, title fees, and reserves deposited with the creditor.
If you have some more items to include, there is a special section for additional items at the end of the chart. Sum all the items you have inserted, put the result in line 1400 and designated lines of the “borrower” and “seller” charts above.
On the third page of the form, you shall state which settlement charges may change in the future (increase or decrease).
Define the Loan Conditions for the Loaner
The form’s last section describes the primary loan conditions the borrower should know. Write the initial sum given to the loaner, term (in years), the interest rate at the beginning of the deal. Insert the initial amount per month that the borrower owes for principal, interest, and insurance.
Answer if the interest rate can increase: if no, mark the relevant box; if yes, mark the box and describe the conditions nearby. Then, reply to other questions about the loan sum for the borrower to help them understand all the loan details.
Issue the Form to All Concerned Parties
After the document is ready, give the copies to every party mentioned there. Borrowers and creditors will need to check all data you have written.