A HUD-1 form, also called a HUD Settlement Statement, is an itemized list of all charges to be paid by the borrower in order to close a reverse mortgage or a refinance transaction. The Closing Disclosure form replaced the HUD-1 form for most other real estate transactions as of Oct. 3, 2015.
Either form must be reviewed by the borrower before the closing in order to prevent errors or unpleasant surprises.
Understanding the HUD-1 Form
The HUD-1 lists all costs related to closing the transaction. Federal law requires the form to be used as a standard real estate settlement form in reverse mortgage and mortgage refinance transactions.
- The HUD-1 form listing all closing costs is given to all parties involved in reverse mortgage and mortgage refinance transactions.
- Since late 2015, a different form, the Closing Disclosure, is prepared for the parties involved in all other real estate transactions.
- Both must be reviewed by the borrower before the closing in order to prevent errors or surprises.
The law also requires that borrowers be given a copy of the HUD-1 at least one day prior to settlement, although figures can be added, corrected, or updated up to the time the parties are seated at the closing table.
Most buyers and sellers review the form with a real estate agent, attorney, or settlement agent.
One note: On the HUD-1 form, buyers are referred to as "borrowers" even if there is no loan involved.
HUD-1 Itemized Charges
Anyone who completed a real estate transaction before Oct. 3, 2015, should have received a HUD-1 before closing.
Oddly, the HUD-1 is meant to be reviewed verso, or reverse side, first.
The reverse side has two columns: The left-hand column itemizes the borrower's charges and the right-hand column itemizes the seller's charges.
The Closing Disclosure form was required by banking reform legislation enacted in 2010.
The borrower's list includes charges related to the mortgage such as a loan origination fee, discount points, payment for a credit report, and fees for the appraisal and flood certification. It also may include any prepaid interest charges, homeowner's insurance fees, property taxes, owner's and lender's title insurance, and the closing agent's fees.
The itemized seller list may itemize the real estate commission, any contractually agreed-upon credit to the buyer, and mortgage pay-off information. The seller's itemized charges typically are lower than the buyer's charges.
The figures on the HUD-1 verso are added up, and the totals are carried to the form's recto, or front side. The amount of cash required to be paid by the borrower and the amount to be paid to the seller appear at the bottom of the front page.
The Closing Disclosure
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 requires lenders to provide borrowers of all types of mortgages other than reverse mortgages and mortgage refinances with a Closing Disclosure form.
Borrowers must be provided with the disclosure three days before closing.
The five-page form includes finalized figures for all closing fees and costs to the borrower as well as the loan terms, the projected monthly mortgage payments, and closing costs.
The three days are meant to allow the borrower to ask the lender questions and clear up any discrepancies or misunderstandings regarding costs before closing.