The HUD-1 Settlement Statement
The “HUD” in the HUD-1 Settlement statement stands for the Housing and Urban Development 1 Settlement statement. It is the physical representation of the government of the United States that is responsible for laws that relate to owning properties such as real estate as well as developing such areas.
The HUD-1 is a form utilized by the government of the United States of America. This form is used for the purpose of itemizing the particulars of numerous items and services together with the appropriate fees that relates to transactions between a third party client and a lender or broker. These are usually called for in instances where in a loan is being applied for or when refinancing for real estate is being done.
As the name implies, it is a settlement or closing statement that provides the summation of all items and services that have been rendered relating to the funds that have been lent or used.
Basically, the third party client (owner) has the right to see the itemization printed on the HUD-1 Settlement statement even on the first day of the agreed settlement. The contents of the form are accomplished by a duly noted settlement agent or officer who will also conduct the actual settlement. The document prepared by the settlement officer must include a comprehensive breakdown of all expenses relating to the real estate or property of interest. This is done in order that all parties may be able to see the transactions relating to the property.
Last 2010, the original HUD-1 Settlement statement was revised in order to include the good faith estimate. The latter is a document that contains an estimation of the actual fees that the third party would agree to pay for during the repayment of the loan provided by the lender or broker. Note that the good faith estimate is provided by the lender upon the application of the loan and the amount stated within the document cannot be altered, and that the actual final cost should not differ by more than 10%.
The reason for the inclusion of the good faith estimate within the HUD-1 Settlement statement is so that the third party client may be able to compare the two documents. In such cases where in there may be variations within the expenses within the HUD form, the client can ask their respective lender or broker regarding the discrepancies and make appropriate corrections or adjustments.
Another related term is the RESPA that stands for Real Estate Settlement Procedures Act. This particular by-law represents a set of rules that relate to home ownership transactions that help to enforce the payment of charges and fees incurred by a third party.
Stated within the RESPA, the HUD form must be, at all times, used by lenders and brokers when providing loans to third party clients when relating to acquisition of real estate that include loans and refinancing. This particular document should also be provided to the client at least one day before the settlement date.