What Is a HUD-1 Form?
Let me tell you about the HUD-1 form, which is also known as a HUD-1 Settlement Statement. It's a standardized document in mortgage lending that creditors or their closing agents use to list out every charge and credit for both the buyer and the seller in a consumer credit mortgage deal. You'll see this form most often in reverse mortgages and mortgage refinances.
Starting from October 3, 2015, the Closing Disclosure form took over from the HUD-1 for the majority of real estate transactions. But if you applied for your mortgage on or before that date, you'd get a HUD-1 instead. For transactions without a seller, like a straight refinance, they might use a HUD-1A form.
These days, for most mortgage loans, you as the borrower will receive the Closing Disclosure rather than a HUD-1. Whichever one you get, you need to review it before the closing to catch any errors or unexpected expenses.
Key Takeaways
The HUD-1 form lists all closing costs and goes to everyone involved in reverse mortgages and mortgage refinances. From late 2015 onward, the Closing Disclosure handles that role for all other real estate transactions. In either case, you as the borrower have to go over the form before closing to avoid any mistakes or surprises.
Understanding a HUD-1 Form
The HUD-1 covers every cost tied to closing the transaction. Federal law mandates its use as the standard settlement form for reverse mortgages and refinances. The law also says you must get a copy of the HUD-1 at least one day before settlement, though numbers can still be tweaked right up until you're at the closing table.
Most buyers and sellers go through the form with a real estate agent, attorney, or settlement agent. On the HUD-1, they call buyers 'borrowers' even if there's no actual loan in play.
What's Included in a HUD-1 Form?
Interestingly, you should start reviewing the HUD-1 from the back side first. The reverse side has two columns: one on the left for the borrower's charges and one on the right for the seller's.
The borrower's side includes mortgage-related charges like loan origination fees, discount points, credit report payments, appraisal and flood certification fees. It might also cover prepaid interest, homeowner's insurance, property taxes, title insurance for owner and lender, and the closing agent's fees.
The seller's side could list the real estate commission, any agreed credit to the buyer, and details on paying off the existing mortgage. Usually, the seller's charges add up to less than the buyer's.
All those figures from the back get totaled and carried over to the front side of the form. At the bottom of the front page, you'll see how much cash the borrower needs to pay and how much the seller gets.
Special Considerations
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 requires lenders to give borrowers a Closing Disclosure for all mortgage types except reverse mortgages and refinances.
Remember, mortgage lending discrimination is illegal. If you believe you've faced discrimination based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, you can take action. One step is to file a report with the Consumer Financial Protection Bureau or the U.S. Department of Housing and Urban Development (HUD).
You must receive the Closing Disclosure three days before closing. This five-page form finalizes all closing fees, costs to you as the borrower, loan terms, projected monthly payments, and closing costs overall. Those three days give you time to ask questions and sort out any issues with costs before the deal closes.
Are HUD-1 Forms Still Used?
Yes, HUD-1 forms are still in use for reverse mortgages and refinancing. This government form used to be the go-to for settlement agents to list all charges in any real estate deal, but the Closing Disclosure replaced it in 2015.
What Is a Reverse Mortgage?
A reverse mortgage is a loan type for people 62 and older. You can borrow against your home's equity to get a lump sum, a steady income stream, or a line of credit. The loan comes due when you die, move out, or sell the home.
When Do I Get a Closing Disclosure?
The law says you get your Closing Disclosure at least three days before closing. It doesn't apply to reverse mortgages or any mortgages applied for before October 3, 2015.
The Bottom Line
The HUD-1 form, or Settlement Statement, is a standard form in U.S. real estate transactions. It breaks down all charges and credits, including loan fees, settlement charges, and escrow payments, giving you and the seller a clear financial picture of the deal.
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