Understanding The HUD-1 Form, Part 3

Assuming the first two parts in these series haven’t put you to sleep, today we are going to look at page 2 of the HUD settlement statement. Page 2 is also known as Section L, Settlement Charges.

Section 700 covers the real estate broker fees. Here the total commission is calculated based on the selling price of the house. The commission can be split between the multiple agents or brokers. These funds usually come from the seller and this amount is often the single largest seller cost listed on the HUD settlement statement form.

Section 800 details the loan fees. These fees include origination charges, points, as well as fees for associated services like the home appraisal and the cost of pulling the borrower’s credit report. Note that brokers can enter negative numbers in line 802, the adjustment for the interest rate chosen, if the adjustment is a credit.

Section 900 lists advance payments required by the lender. Common entries in this part of the HUD 1 statement are the prorated interest that must be paid during a refinance and premiums for mortgage insurance required when borrowers don’t make sufficiently large down payments.

Section 1000 contains the reserves deposited with the lender to be held in escrow and cover costs such as homeowner’s insurance or the first few months of property taxes. The final line is the adjustment between the single-line amounts and the amount due according to aggregate accounting rules laid in RESPA rules.

Section 1100 is the part of the HUD-1 form where you’ll find charges incurred by the title company and any professionals such as notaries or attorneys. If one entity provides several listed services for a single charge then the aggregate fee can be entered on line 1107 or 1108. Include the line items of the other fees included and the amount won’t have to be broken down onto individual lines.

Section 1200 lists city, county and state recording and transfer charges. Agents who work in multiple jurisdictions must be careful to use the correct tax tables for the sale. Tables can vary by county, city, type of sale or other factors. Most agents use HUD settlement statement software to ensure they enter the figures correctly.

Section 1300 is where you find miscellaneous settlement charges that don’t fit under other categories and finally Section 1400 sums up all these values to show the total charges attributed to the borrower and the seller.

That concludes our trip through the HUD settlement form. It’s a complicated and meticulous document and there is no reason to complete it by hand with inexpensive software readily available. Contact Easy Soft to find out more about Easy HUD and our other legal practice management software.