What is the HUD-1 settlement statement?

When making sense of all the costs of a real estate transaction, there are standardized documents designed to help you understand who pays what, and how much. Depending on the type of deal, one of those forms might be the HUD-1 statement.

What is a HUD-1 statement?

The HUD-1 form is a three-page mortgage document required in certain cases. This document contains an itemized list of every fee charged for the loan. This form is also commonly referred to as a settlement statement because it’s one of the final pieces of paperwork that comes before the transaction officially closes, or “settles.”

Mortgages that require a HUD-1 statement

The HUD-1 form used to be furnished in most real estate transactions, but today, it doesn’t play a role in typical home purchases. If you receive a HUD-1 form nowadays, you’re likely dealing with one of these specific types of mortgages:

• Reverse mortgage: If you’re an older homeowner tapping your equity via a reverse mortgage, you’ll receive the HUD-1 statement.
• Refinance: If you’re refinancing your mortgage, you might receive the HUD-1 form, but not always. You could instead receive a closing disclosure — more on that below.

HUD settlement statement vs. closing disclosure

The more common settlement statement in real estate is a closing disclosure, which is now issued to most borrowers. Both the HUD-1 and closing disclosure have the same aim: to educate borrowers about all the costs of their mortgage. The differences between the two include:

• How long it is – The closing disclosure is designed to be easier to read for borrowers. It’s a bit longer — five pages for the closing disclosure versus three for the HUD-1 form — but it’s simpler to comb through and understand.
• When you’ll receive it – The law requires that borrowers receive closing disclosures at least three business days before the scheduled closing. The HUD-1 only has a one-day advance policy, so borrowers receiving this form are under a tighter timeline to resolve any issues.

Understanding the HUD-1 form

The three pages of the HUD-1 form include a summary of all the costs associated with the mortgage (page 1), an itemized list of each expense (page 2) and a comparison between your initial loan estimate and the final settlement (page 3). Here’s a rundown of everything you’ll see:

• Commission fees due to real estate agents
• Loan charges, including origination fee, prepaid points, appraisal costs and any fees for tax services, flood certification and credit reports
• Advance payments for per diem interest, homeowners insurance and mortgage insurance
• Escrow deposits for homeowners insurance, mortgage insurance and property taxes
• Costs for title services and title insurance
• Fees for government recording services
• Your loan amount, interest rate and monthly payment

Pay especially close attention to page 3. This is where you can easily compare costs with the initial loan estimate, and it includes a guide on which charges are allowed to change from that estimate and by how much.

Additionally, this page includes key questions that could impact your long-term financial well-being, including whether your interest rate can increase and whether you can be penalized for paying off your balance early.

Bottom line

If you receive the HUD-1 statement, read this document closely. Ideally, have a real estate attorney help you double-check it to make sure you aren’t overpaying for anything and that there are no mistakes that could cost you extra money. Remember: You could be paying back this amount for decades to come, so the day you receive the HUD-1 plays a very important role in your financial future.