The HUD-1 Settlement Statement is a standard form used by lenders and title companies that details the costs associated with getting a loan on a home. The document itemizes the costs ahead of the closing so there is full disclosure and so the buyer gets no surprises. The Consumer Finance Protection Bureau requires a title company to send the HUD-1 to the borrower, if requested, with the most accurate information possible regarding his settlement costs.
What Is RESPA
The Real Estate Settlement Procedures Act of 1974, called RESPA, is enforced by the Consumer Finance Protection Bureau to protect borrowers involved in real estate transactions. RESPA requires lenders to disclose the costs associated with a real estate transaction, such as purchasing a home or refinancing it. Additionally, RESPA protects consumers from fraudelent activities, such as undisclosed kickbacks or misuse of a designated escrow account.
Where's My HUD-1 Statement
RESPA requires a lender to send a "Good Faith Estimate" to a borrower within three business days of receiving the mortgage application, showing its best estimate of what the closing costs will be. RESPA also mandates that the borrower receive a copy of a HUD-1 Settlement Statement within one business day of closing. While RESPA stipulates that the borrower request the HUD-1, in most cases the title company conducting a closing will send the HUD-1 to the borrower unsolicited. A borrower may get more than one HUD-1 as the closing approaches and costs associated with the closing change. If the HUD-1 does not reflect what was previously quoted on the Good Faith Estimate or there are significant discrepancies, the borrower has the opportunity to get them resolved before the closing.
Comparing the Good Faith Estimate and Closing Costs
The third page of the HUD-1 compares the Good Faith Estimate with the final costs, as recorded in the HUD-1. Some costs can change by no more than 10 percent, total, or the lender will owe the borrower a credit for not accurately estimating the costs. Some third-party costs, such as homeowners insurance and the appraisal, can change by more than 10 percent of the costs that were previously estimated. Costs that are not allowed to change include the origination fees set by the lender and quoted on the Good Faith Estimate.
Verifying Loan Terms For Accuracy
The bottom section of the third page of the HUD-1 recaps the terms of the loan, including the loan amount, interest rate, and length of the term. This information should reflect the lender's previously quoted interest rate. If the lender requires private mortgage insurance, it will be listed here as well. Any special terms of the loan, such as pre-payment penalties, balloon payments, and future escrow contributions, will also be listed here for the borrower's review.
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