What Is the HUD 1 Settlement Statement?

By Sari R. Updated on 12/11/2014

What is the HUD 1 Settlement Statement all about? If you’re buying or selling a home, you will have to come in contact with this important document. Use this article to understand how best to read and interpret each section of the HUD 1 Settlement Statement. 

What is the HUD 1 Settlement Statement?

Essentially, the HUD 1 Settlement Statement is the form used by a closing agent or settlement that itemizes all of the charges that the borrower and seller are responsible for in a real estate transaction.  This form lists what both the borrower and seller are responsible for in terms of outgoing and incoming funds.  The HUD 1 Settlement Statement is also sometimes referred to as a settlement form or a closing sheet (Investopedia).

What is the purpose of the HUD 1 Settlement Statement?

The Real Estate Settlement Procedures Act requires that borrowers are given the HUD 1 Settlement Statement at least day before settling.  However, some form entries may not be recorded on the HUD 1 Settlement Statement up until a few hours before closing.  When buyers and sellers look at the form, any errors that have been made are likely to be caught.  You can compare the HUD 1 to the Good Faith Estimate your lender provided you when you initially applied for your loan to make sure you weren’t charged extra for any fees. 

You will also need to save your HUD 1 to give to your tax preparer so he or she can help you file your taxes properly in the year of your purchase or selling.

How do I interpret the HUD 1 Settlement Statement?

If you look at the HUD 1 Settlement Statement, it might seem like a lot of gibberish initially.  Luckily, there are some easy ways to be able to interpret the form and easily make sense of it:

Sections A – I: Identification and Reference Information

The first section of the HUD 1 Settlement Statement is to identify you and the other party as well as provide information about the mortgage and closing.  The file number (B6) refers to the settlement agent’s file number, which you will need if you are in contact with the escrowee regarding escrow or title questions.  The loan number (B7) is the account number your lender has assigned to your loan; you will need this if you ever have any questions for your lender about your loan.

Sections J-K: Credit and Cost Summaries

Sections J and K are dedicated to showing the borrower/seller transactions and summarizing the payments and fees that are recorded in Section L, which is on the following page.  Numbers in the 100s to the 300s all refer to the borrower; numbers in the 400s to the 600s all refer to the seller.  The primary transaction between the seller and borrower can be seen in the 400 and 100 line; this just shows how much is being paid for the home and in what form.  You will see that the 100 line shows the borrower debits and the 400 line shows the seller credits.  The home’s purchase price can be seen in lines 101 and 401; any extra purchase price for property sold within the home can be seen on lines 102 and 402.

Line 103 on the borrower’s side doesn’t have a corresponding line on the seller’s side because the seller’s settlement charges are debited from the purchase price as opposed to being credited against it.  You will be able to find these charges on Line 502, and you can see that they are subtracted from the Gross Amount Due to Seller on Line 420.

If you had any new construction costs, these will be listed on Line 104.  Line 105 will show you the price of a manufactured home when it isn’t simultaneously charged with the land price.

You’ll see that Line 120 is listed as “Gross Amount Due from Borrower.”  This is the total sum of what you are laying out for the purchase price, other purchase costs, and settlement charges.  On the seller’s side, Line 420 is listed as “Gross Amount Due to Seller.”

The other lines in the 100 and 400 list are used to detail the seller reimbursements such as if the borrower is required to reimburse the seller for extra tax or insurance reserve accounts.  The lines in the 200 list are used to show credits that lower the dollar amount you must provide when closing.  The borrower’s earnest money credit can be seen in Line 201; the seller’s debit for earnest money can be seen either in Line 501 or 506 (depending on whether the amount is being brought to closing or being held by a broker).

Line 202 shows the amount of the first purchase money loan, and the amount that the borrower will assume of the seller’s loan can be seen on Line 203.  Home equity loans or second purchase money mortgages are detailed on lines 205, 206, 207, 208, and 209.  If the seller is paying for the owner’s title insurance policy, the credit to the borrower can be seen on Line 204.  The debit to the seller can be seen on Line 507.  Property taxes and assessments that are proportionally divided are seen on lines 210 through 212 on behalf of the borrower and lines 510 through 512 on behalf of the seller.  Property taxes that are due but not yet billed are credited to the borrower in 210 and 211 and debited from the seller in 510 and 511.  Assessments follow the same pattern as property taxes in Lines 212 and 512.  If a seller’s old loans are paid off in the closing, this can easily be seen in Lines 508 and 509.  However, if there are more payoffs, you will be able to see these listed by Lines 513 through 519.

The 300 list will be the calculation of money that must come to a close.  Everything from the borrower’s Line 120 is brought to Line 301.  Credits are totaled in Line 302 and subtracted in Line 303, which gives the borrower the total amount on Line 303.  The seller’s total amount is calculated in a similar manner on the 600 list.

Section L: Settlement Charge Details for Both Parties

Essentially, Section L is all about the settlement charges:

• 700 Line: Deposit amount retained for commission, broker’s commission, how it will be divided among all the involved brokers
• 800 Line: Loan charges such as the origination fee, third party service fees, points, tax servicers, credit reports
• 900 Line: Homeowner’s insurance, mortgage insurance premiums, prepaid interest
• 1000 Line: Insurance and tax reserves that are paid at closing by the borrowers
• 1100 Line: Escrow/Title Insurance Fees, attorney’s fees, owner’s policy premium
• 1200 Line: Governmental charges and transfer taxes
• 1300 Line: Third party closing charges