Legal Definitions - HUD-1

The HUD-1, which stands for the U.S. Department of Housing and Urban Development Settlement Statement, is a standardized document used in real estate transactions involving a mortgage loan. It provides a comprehensive breakdown of all financial charges and credits for both the buyer (borrower) and the seller (if applicable) at the time of closing.

This form itemizes every cost associated with the transaction, ensuring transparency regarding where money is being spent. These costs can include fees directly related to the loan, such as origination fees and discount points, as well as other expenses like title insurance premiums, property taxes, recording fees, and attorney fees. The closing agent typically provides the HUD-1 to the borrower on the day the real estate purchase is finalized. In situations where there is a borrower but no seller, such as a mortgage refinancing, only the borrower's section of the HUD-1 form is utilized.

Here are some examples of how the HUD-1 applies:

• Example 1: First-Time Home Purchase
  Maria and Alex are purchasing their very first home. On the day they sign all the final papers, their closing agent presents them with a detailed document. This document lists every single expense they are incurring, from the lender's fees for processing their mortgage to the cost of the property appraisal, the title search, and even the initial payment for their property taxes. They review this document carefully to understand all the financial aspects of their purchase.

  This illustrates the HUD-1 being used in a standard home purchase, providing Maria and Alex, as borrowers, with a complete itemization of all closing costs before they finalize their transaction.

• Example 2: Mortgage Refinancing
  Mr. Henderson has owned his home for several years and decides to refinance his existing mortgage to take advantage of lower interest rates. At the closing for his new loan, the attorney provides him with a document that outlines all the charges associated with this refinancing. This includes the new lender's administrative fees, the cost of a new title insurance policy for the updated loan, and any government recording fees. Since Mr. Henderson is not selling his home, this document focuses exclusively on his costs as the borrower for the new mortgage.

  This demonstrates the HUD-1's application in a refinancing scenario, where only the borrower's side of the form is relevant, detailing the costs of securing a new loan without the involvement of a seller.