Any Home transaction will never be complete without HUD-1 Final Settlement Statement whether you are buyer or seller especially if lender is involved. The HUD-1 is required under Section 4 of RESPA and Regulation X of the Department of Housing and Urban Development (24 CFR part 3500). The HUD-1 is to be used as a statement of actual charges and adjustments to be given to the parties in connection with the settlement. It has to be prepared by the Title company working with lender if one involved in the transaction and builder if it’s a new home.

The HUD-1 has to be provided to the Buyer atleast 24 or 48 hours before closing. But it never happens all the time. Sometimes they are sent to them just few hours before the closing and buyers/seller don’t have enough time to go through them to make sure all cost appears as accounted by the respective parties. Below is the sample HUD-1 Page 1 with some markings for easy understanding on the explanation.


Every HUD-1 statement is split into two sides, the left side for the buyer and the right side for the seller. The second page has detail breakdowns of the subtotals from Page 1.

Let see Page-1 left side, buyer’s breakdowns first which is marked as 1B, 1.1B, 2B, 2.1B and 3B.

1B – This section which starts from Line #100 reflects buyer amount due from purchase/sale price, personal property like washer, dryer or any involved in the transaction and settlement charges(total at Line 1400) from Page 2. Quick Note on Personal Property – Most mortgage lenders are very sensitive to having items of personal property included in a loan transaction since they are limited to making loans on real property alone. Most likely the personal property transaction are handled outside of this transaction or the amount gets added to the buyer’s cash needed to close.

1.1B – This section starts at Lines #106 showing items owed by Buyer for seller prepaid taxes or HOA fees if any. Lines 120 reflect total sums owing by Buyer.

2B – This section shows all credits to the Buyer starting from Line #201 like earnest money paid by the Buyer at the time of contract signing. This section also will have any Realtor contribution or seller contributions towards closing cost.

2.1B This section starts from Lines #210 reflecting tax proration credits to the Buyer. Buyer gets County, MUD, School tax credit from Seller for the time period he owned the property for that year so seller don’t have obligation to pay when time comes. It will be the obligation of the buyer to pay the tax for that tax year when time comes for the full year.

3B – This final section at Line #300 will show the final amount the Buyer should bring to the closing. It is the amount Buyer should take cashier check or wire transfer to the Title company. This amount is derived by subtracting Line #220 from Line #120.

Summary
Let me point out few important things to check out in the HUD Final Statement,

1. Check whether the Settlement charges in Page-2 is properly listed in section 1B.
2. Don’t forget to check the earnest money and option fee if any is credited in section 2B.
3. Make sure taxes are probated and credited correctly as of Closing date in section 2.1B
4. If Realtor is contributing, make sure there is an credit entry in 2B section. It might say Builder contribution if you are purchasing a new home.
5. Arrange to get a cashier cheque(your bank should issue one for free) or wire transfer for the amount in the section 3, nothing more.

That concludes the Buyer section on the Page-1, we will see the Seller’s section and Page-3 of the statement in the next post.

About Vijaianand Thirnageswaram

I am a Proud Realtor of Texas, trying to guide and help clients to find their dream home and educate them to buy them for right price. I am also a Candidate for CFP who has more financial knowledge which allows me share and educate clients in any financial decision making process.

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