Slightly before closing, you will hear a lot of talk about your HUD-1 form. Your lender will talk about it, your real estate agent will reference it, underwriting will use it, and you may have no idea what anyone is talking about. It may also be called the Settlement Statement, Closing Statement, or Settlement Sheet. Prior to closing, and much closer to the finalization of the final contract, it may also be referred to as the GFE, or Good Faith Estimate. HUD is the federal government department of Housing and Urban Development. In order to standardize real estate transactions and make everything as clear as possible, this government agency developed this form to make sure that everyone is on the same page at closing.
The HUD-1 is the complete list of incoming and outgoing funds related to your real estate transaction. It includes not only the monies that are exchanged at closing, but those that have already been exchanged, such as those that are in escrow, and if any are to be exchanged after closing.
You will receive the HUD-1 form at least one day prior to your closing. The purpose is for you and your agent to review the form and make sure all agreed upon monetary terms of your contract are met. It is a full disclosure of funds from both the buyer’s and the seller’s sides, broken down into categories. The categories are denoted by a series of numbers: 700 series, 800 series, 900 series, etc., up to 1300 series. These different number series have a purpose and are standardized across all real estate transactions. For example, the 700 series breaks down the realtors’ commissions: who is paying them and how much they are. The 1000 series tells the buyer all about escrow: number of months required by the lender, monthly amounts to be paid, and what escrow is to be used for. The 1200 series gives a record of the government’s take: recordation fees; state, county, and city transfer and recordation taxes; and other governmental taxes. The 1300 series are left for any miscellaneous items. Because not all real estate transactions are exactly the same, this miscellaneous category is saved for anything not covered by the other six categories.
The HUD-1 is your final chance to review your real estate transaction in its entirety. Make sure to review it and ask any questions you may have of your Hagan agent. This form, along with the final walk-through of the property, are there for your protection. They ensure that everyone is on the same page with the transaction, so that both parties feel completely secure.