What is a HUD-1 Settlement Statement and When is it Used?
The HUD-1 Settlement Statement, which is commonly referred to as the HUD or the Settlement Statement, is a standardized form which provides a line item detail of all of the charges associated with a residential real estate transaction (i.e. a purchase or refinance).
The Real Estate Settlement Procedures Act (commonly known as RESPA) requires the use of the HUD-1 Settlement Statement for transactions involving a federally related mortgage and in which there is a Borrower and a Seller. However, the industry standard is to use the HUD-1 for cash deals and refinances as well.
How is the Settlement Statement Read?
Page 1 of the Settlement Statement identifies the loan type (e.g. FHA, VA, conventional), the Buyer/Borrower, the Lender, the Seller, the Settlement Agent, the property location, and the settlement and disbursement dates. In addition, the first page provides a summary of the transaction with the Buyer’s side of the transaction documented in the left column of the Settlement Statement and the Seller’s side recorded in the right column. If the transaction is a refinance, a summary of the Borrower’s transaction will appear in the left column and the right column will be left blank since there is no Seller.
Page 2 of the Settlement Statement provides a line by line accounting of the various settlement charges with the Buyer’s fees again accounted for in the left column and the Seller’s charges listed in the right column. These settlement charges are grouped by type. For example, Items Required by the Lender to be Paid in Advance (e.g. prepaid interest, mortgage insurance premium, hazard insurance premium) can be found in Section 900 of the Settlement Statement. All of the individual settlement charges are then totaled at Line 1400 of the HUD (titled Total Settlement Charges) and recorded again on Page 1 at Line 103.
Download a sample HUD-1 Settlement Statement (1.34 MB PDF)
Summary of the HUD-1 Settlement Statement
The HUD is a standardized form which provides a line item accounting of the transaction. It is commonly used for both purchases and refinances, although it is only required by RESPA in transactions involving a federally related mortgage and in which there is a Borrower and a Seller.
In preparing for a real estate closing, be sure to review the HUD before arriving at the closing table (presuming of course that time allows for the circulation of the final HUD in advance of closing; in practice this does not always happen as oftentimes there are last minute adjustments). Do not presume that the HUD is perfect. Although the settlement agent should thoroughly review the HUD prior to circulating the final version, it is entirely possible that a mistake was made while entering the data. If you have questions, consult with your attorney and real estate agent. By reviewing the HUD and addressing any issues in advance of the closing, you are setting the stage for a smooth and successful closing.
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Mark Strickland 
