Home Buyers: How to Read Your HUD-1 Statement

Note: This article refers to a form that is in use until October 3, 2015. For those who submit a mortgage application on or after this date, two new forms, called a "Loan Estimate" and a "Closing Disclosure," replace the HUD-1 Settlement Statement, the Good Faith Estimate, and the Truth-in-Lending disclosure form that were formerly required in mortgage loan closings. If you applied for your mortgage prior to October 3, 2015, you'll receive a HUD-1. This article can help you better understand this form, which is important because, for one thing, it can help you prove a gain or loss when you sell your home.

The HUD-1 provides a picture of the monetary side of the property closing. It shows the all of the money transfers between you, as the buyer, and the home seller, and all of your closing costs, including the escrow and title fees, and the costs of your loan. It's a standardized form that your settlement agent or "escrowee" completed at the closing, as required for all closings involving a federally insured lender under the Real Estate Settlement Procedures Act ("RESPA") (12 U.S.C. § § 2601–2617).

The HUD-1 is an important document. The form shows where your purchase money was spent. You can compare the HUD-1 to the Good Faith Estimate ("GFE") given to you by your lender when you applied for your loan to make sure you were not overcharged for any loan, title, document recording, or escrow fees. Read more about comparing your HUD-1 with the GFE below.

It's also important to save your HUD-1 for your tax preparer. You'll need it in the year of your purchase, and also in the year you sell the property.

The HUD-1 form itself was created by the U.S. Department of Housing and Urban Development ("HUD"), and was updated by HUD periodically. The latest version is available at HUD's website.

What Does the HUD-1 Show?

The HUD-1 is a multi-part form, divided into sections by topic, as described below. It's also divided into the buyer's side and the seller's side. The buyer is referred to as the "borrower" on the form because the HUD-1 was created to explain closings involving lender financing. However, the HUD-1 is sometimes used in cash-only deals when closed by a title insurance company or separate escrow company.

HUD-1 Sections A Through I: Reference and Identification Information

The top of the first page of the HUD-1 shows information about the parties, the mortgage, and the closing.

The file number (Section B. 6.) is the settlement agent's file number, and you will be asked for it if you call the escrowee (or title insurer, if the same company) with title or escrow questions. The loan number (Section B.7.) is the lender's account number for your loan, and you'll need it whenever you seek information from your lender, or any lender that may buy your loan in the future.

HUD-1 Section J and K: Summaries of Costs and Credits

Sections J and K show the transactions between the borrower and the seller, and summarize the fees and payments from Section L on the following page. Line numbers in the 100, 200, and 300 series pertain to the borrower. Line numbers in the 400, 500, and 600 series pertain to the seller. Some of this gets a little dry, but it's worth wading through, to make sure you fully understand the form.

The basic transaction between the borrower and the seller is shown in the 100 and 400 line series – in other words, how much you're paying for the house, and in what form. The two sides (the borrower's side and the seller's side) generally mirror each other. The 100 series shows debits to the borrower and the 400 series showing corresponding credits to the seller.

The purchase price for the real estate is found in lines 101 and 401. Any additional purchase price for personal property sold with the real estate, if any, is found in lines 102 and 402.

You might notice that line 103 on the borrower's side, which is the total of all of the borrower's settlement charges shown in Section L, does not have a corresponding line on the seller's side. That's because the seller's settlement charges are deducted from the purchase price, rather than credited against the purchase price as on the buyer's side. You'll find the seller's settlement charges on line 502, where they're subtracted from the Gross Amount Due to Seller on line 420.

The cost of new construction, when not included as part of the purchase price, is stated on line 104. The purchase price of a manufactured home when charged separately from the price of the land is stated on line 105.

Line 120 is labeled "Gross Amount Due from Borrower." It's the sum of all the money you pay for the purchase price, the cost of all other purchases, and the total settlement charges. Correspondingly on the seller's side, the total of the purchase price and other sums due from the borrower to the seller is shown on line 420 as "Gross Amount Due to Seller."

The other lines in the 100 and 400 series are used for various reimbursements to the seller. If your contract required you to reimburse the seller for his or her prior payments that will benefit you in the future, you will find those figures in lines 104 through 105 and 404 through 405. For example, you may have been required to reimburse the seller for excess tax and insurance reserve accounts if you assumed the seller's loan, or you may have owed the seller tenant rents that were due prior to the closing, but were unpaid and collectible on that date.

Similarly, you may have reimbursed the seller for advance payments to third parties for flood insurance, or mortgage insurance if you assumed the seller's mortgage. These reimbursements are shown in lines 106 through 112.

Credits that reduce the dollar amount you must bring to the closing are shown in the 200 series. The borrower's earnest money credit appears in line 201, with the corresponding seller's debit for earnest money on either line 501 or Line 506. The latter depends on whether it's being brought to closing (find it on line 501), or all or part of the earnest money is being held by a broker as payment of commissions (find it on line 506).

The face amount of the first purchase money loan is shown on line 202. The amount of a seller's loan assumed by the borrower is shown on line 203. Second purchase money mortgages, or home equity loans that are subordinate to the first purchase money loan, are shown on lines 205 through 209. In states where the seller pays for the owner's title insurance policy, the borrower's credit for the premium for the owner's title insurance policy is shown on line 204, and debited to the seller on Line 507.

Real property taxes and assessments that are proportionally divided between the borrower and seller as of the closing date are shown on lines 210 through 212 on the borrower's side, and lines 510 through 512 on the sellers side. General real property taxes due, but not yet billed and payable, are credited to the borrower in lines 210 and 211, and debited to the seller in the corresponding 500 series lines.

Assessments are similarly credited and debited in lines 212 and 512, respectively. Any closing cost credit given by the seller to the borrower will appear in the 200 and 500 line series.

Seller's old loans paid off through the closing are shown on Lines 508 and 509. If there are more payoffs, they can be shown on lines 513 through 519.

You'll find a calculation of the sum of money you must bring to the closing (called the borrower's "bottom line") in the 300 series. Everything due from the borrower that was totaled in line 120 is brought forward to line 301. All credits that reduce the amount due from the borrower are totaled in line 302, and then subtracted from line 301, resulting in the borrower's bottom line shown on line 303.

The seller's bottom line, being the amount of money the seller receives at the closing, is similarly calculated in the 600 series.

HUD-1 Section L: Detail of Settlement Charges for Borrower and Seller

Section L contains a long list of settlement charges. Charges shown in the left column are paid by the borrower, and charges shown in the right column must be paid by the seller. The settlement charges are grouped into the following line series:

• Line series 700 shows broker's commission, the amount of any deposit retained for commission, and how the commission will be divided among all of the brokers involved in the sale.
• Line series 800 shows loan charges such as the origination fee, points, and fees for third party services to the lender including the appraiser, the credit reporting company, tax servicers, and flood certification services.
• Line series 900 shows prepaid interest, mortgage insurance premiums, and homeowner's insurance.
• Line series 1000 shows tax and insurance reserves paid to the lender at the closing by those borrowers who are required to make monthly payments for these items directly to the lender. The number of months of reserves required by the lender varies, and can sometimes be negotiated depending on the type of loan and the borrower's financial situation.
• Line series 1100 shows title insurance and escrowee fees, including premiums for the owner's and loan policy, the owner's policy premium (again, referenced in Sections J and K described above). Attorney's fees are also put into this line series.
• Line series 1200 list governmental charges for the recording of the deed and mortgage, and transfer taxes, which are often charged by the state, county, and municipality where the property is located. For more on transfer taxes, see Nolo's article "Home Buyers: What Documents to Expect at Your Close of Escrow."
• Line series 1300 is for additional third-party closing charges including inspectors' fees, surveyors' fees, and fees for additional escrow services such as a separate possession or repair escrow.

Compare the HUD-1 to Your Good Faith Estimate

As mentioned, you can use the HUD-1 to confirm that the actual loan and closing charges haven't jumped from the estimated charges you were shown on the Good Faith Estimate (GFE). To make this task easier, the law requires the escrowee to reference line items on the GFE within the corresponding line items on the HUD-1.

Page 3 of the HUD-1 shows the detailed comparison. The law also prohibits increases in the loan origination fees, points, and transfer taxes from the amounts shown on the GFE, and requires that government recording charges, and charges for third-party services where the third-party is selected by the lender or the seller, such as appraisal fees, credit reporting fees, tax service fees, flood certifications, prepaid mortgage insurance, and title insurance premiums, never increase greater than 10% from the estimate. The GFE form, including an explanation of which charges cannot change, can be found on the HUD website.

With all the stress of closing and moving, you may not have noticed an error in the HUD-1, or an unexpected fee, or fee increase from the GFE, until after it's over. In such case, do not hesitate to contact the attorney who assisted you at your closing, or if you did not have one, the escrowee, or even the lender directly. Your lender should address any concerns about unlawful increases in settlement fees right away, because it is legally obligated to reimburse you for these. If your loan or closing officer does not help you, ask to speak to someone in the compliance department.