How do I read a HUD?

Answer:

As of 8/1/2015, the HUD-1 has been replaced with the Closing Disclosure. It is a summary of all the costs involved in the purchase of a property.

How do I read a HUD?

A HUD-1 is rarely used now, except for some cash sales and reverse mortgages.

Click here for an example of a Closing Disclosure form.

Click here for a guide on reading and understanding the Closing Disclosure.

Created by the US Department of Housing and Urban Development, the HUD itemizes the charges, credits and payments between the buyer and the seller. The top of the first page, Sections “A” thru “I” covers the basic information such as:

  • the names of the buyer and seller
  • the lenders information
  • the name of the title company
  • the address where the property is located
  • the closing date
  • the name and address of the lender
  • the loan number and file number

HUD Sections “J” and “K”

Just below Sections A-I, you will find that the page is divided in half. The left side, “Section J”, is a summary of the borrower’s (buyer) transaction. The right side, “Section K”, is a summary of the seller’ transactions.

Lines 100-303 show the amount due from the buyer. Lines 400-603 show exactly what is due to the seller. This section, basically shows how much the buyer is paying to the seller for the property.

The two sides mirror one another in that there will be a debit from one side and a credit on the other. The price for the property, for instance, is shown on line 101 for the buyer and line 401 for the seller.

Any additional costs for personal property being sold with the home are on the next lines (102 and 402 respectively).

It gets a little tricky on lines 103 (buyer’s side) because there is no line that corresponds on the seller’s side.

Instead, you will find the seller’s settlement charges on line 502, where they are shown as subtracted from the Gross Amount Due to Seller, listed on line 420.

HUD Breakdown of Closing Costs

  • Line 303 – Total Amount due from buyer
  • Section 700 – Real estate agent and or broker fees (typically, 3% to each agent)
  • Section 800 – A breakdown of the fees related to the buyer’s loan (loan origination fee, loan discount or “points”, appraisal fees, credit report fee, lender inspection fees, mortgage insurance application fee, assumption fee, mortgage broker fee, yield spread premium)
  • Section 900 – List of any amount that the lender requires to be paid in advance (interest, mortgage insurance premium, hazard insurance premium, flood insurance)
  • Section 1000 – Escrows, impounds and reserves
  • Section 1100 – Administrative fees (title search, title examination, settlement or closing fee, document preparation fee, notary fee, attorney fees, title insurance, and final title payoff)
  • Section 1200 – Public records and any related government recording fees, transfer taxes
  • Section 1300 – Miscellaneous charges such as survey and inspection fee

Compare the HUD to Your Lender’s Good Faith Estimate

The law requires a breakdown of the lender’s charges as compared to the lender’s GFE or Good Faith Estimate.

These include third party charges such as credit reporting fees, tax service fees, pre-paid mortgage insurance, appraisal fees, flood certifications and title insurance premiums.

The important thing to bear in mind is that the fees can never be greater than 10% of the Good Faith Estimate the lender made.

If they are, the lender is required by law to reimburse the borrower.

Make sure that you pay close attention to each section before signing. Be sure to get clarification for any sections or lines that you do not understand. If you find a mistake or have a concern, make sure you get the problem addressed then and there.

If You Discover a Mistake After Closing

Between going to closing and moving, many people feel stressed out and even overwhelmed. That means that you might overlook an error when reviewing the paperwork.

If you do find a mistake after closing has been completed, you will need to contact either the seller (or their representative) or the lender, depending on who make the mistake.

If you do not know who to contact at the lender office, ask to speak to their compliance department.

…And now a moment from our lawyers:

The preceding information is intended for educational as well as entertainment purposes and in no way constitutes legal advice. Creekview Realty, in no way, can be held liable for your choice to use the above information… Enjoy!” – Our Lawyers

By | 2015-04-15T21:53:24+00:00 April 15th, 2015|Title Questions|