What to Expect on a Settlement Statement
Under the Real Estate Settlement Procedures Act, also known as RESPA, almost all real estate closings require that a settlement statement, or HUD-1, be completed. The settlement statement should include all monies paid
or received by both the buyer and the seller of the property. While each of the parties should review the entire document, there are certain things that every settlement statement must contain.
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Lender's Fees
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The settlement statement must disclose any points you are paying to the lender, as well as any loan origination fees. If you obtained your loan through a broker, the settlement statement must also disclose the broker's fee you are paying, as well as the money being earned by the broker from the lender (often referred to as "yield spread premium").
Professional Fees
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The settlement statement will reveal how much commission is being paid to the real estate agent, and by whom. Also included will be a list of fees paid to other professionals, such as appraisers and attorneys.
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Prepaid Items
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There are a number of items which some lenders may require you to pay upfront, and these items must also be listed on the settlement statement. They include things like premium down payments for mortgage insurance, hazard insurance, flood insurance, as well as disclosure of per diem interest (interest from the date of closing until the date of the buyer's first mortgage payment) and amounts escrowed for real estate taxes.
Title and Tax Charges
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All fees associated with obtaining the title or title insurance will be disclosed. In addition, the transfer of real property is always taxed by one governmental unit or another, and the settlement statement will reveal who is taxing your transaction and in what amount.
Summaries
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The settlement statement will also contain a summary of each party's transaction. The buyer's summary will show all of the amounts paid by the buyer or on behalf of the buyer, including the down payment, all charges, and the amount borrowed. The seller's transaction will show all amounts to be paid by the seller, as well as the net
amount to which the seller is entitled after closing.
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