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Closing Costs
Settlement day should be the most exciting day in the home buying process, and once you understand how it works, it can be.  There are a multitude of costs associated with your purchase in addition to your new home’s sales price.  All of those closing costs must be listed on your HUD-1 Settlement Statement, which is required to be filled out prior to finalizing your transaction.  Because fees vary depending on where you live, please be sure to speak with your MAXIMUM Settlement Specialist for more specific information.

The Basics
A closing, or settlement, is the conclusion of a transaction where title to a property is transferred from the Seller to the Buyer and includes delivering the deed, signing notes and security instruments, disbursing funds necessary to finalize the sale or loan transaction.  MAXIMUM typically holds the closing in one of our branch offices; however, you may schedule a different location with your MAXIMUM Settlement Specialist.

All financial issues, or closing costs, are also settled at closing.  Closing costs are all expenses related to closing your real estate transaction and can include items such as survey fees, taxes, title insurance, attorney or agent fees, and the balance of your down payment.  Before you close on your purchase, you should review your final HUD-1 to verify all included calculations, amounts, and information.

A HUD-1 Settlement Statement, or closing statement, is a balance sheet that shows the amounts being debited from and credited to the Buyer and Seller in addition to other detailed information such as loan amount, purchase price, and more.   The Department of Housing and Urban Development requires that the Title Company or closing agent completes this document on most lender-involved residential real estate transactions.

The Federal Government designed the HUD-1 to protect consumers, both Buyers and Sellers, and to make sure that all the parties to a real estate transaction receive full disclosure about the sources and uses of all funds collected and paid out by the buyers, sellers, and their agents at loan closing.  Indeed, the HUD-1 provides you with a precise accounting of your transaction showing all cash received, all charges and credits made, and all cash paid out.

HUD-1 Settlement Statement
HUD-1.pdf

The Breakdown
Below we have outlined the entire HUD-1 Settlement Statement for you.   The document’s first page is a summary of the purchase transaction while page two itemizes the closing costs with totals that carry over to page one.
 
B. Type of Loan 
1-5. The Borrower’s financing type.

6.  File Number: The title company’s file number (for their reference).

7. Loan Number: The lender’s loan number (for their reference).

8. Mortgage Insurance Case Number: The number the FHA assigns to an FHA loan (for their reference).

C. Note

D. Name & Address of Borrower

E. Name & Address of Seller
 
F. Name & Address of Lender

G. Property Location

H. Settlement Agent / Place of Settlement

I. Settlement Date

J. Summary of Borrower’s Transaction

100. Gross Amount Due from Borrower

101. Contract sales price: The agreed upon sales price of the property as set forth in the sales contract.

102. Personal property: The gross sales price of any items not included in Line 101, including carpets, drapes, appliances, fixtures, and others.

103. Settlement charges to Borrower: The total charges to the Borrower that is carried over from Page 2, Line 1400.

104-105. These line items are any charges that need to be paid such as taxes and homeowners’ association transfer fees and may be left blank.

Adjustments For Items Paid By Seller in Advance

106-108. City/town taxes; County taxes; Assessments: The taxes and assessments the Seller may have paid in advance for an entire year or other period.  When settlement occurs prior to the paid through period, the Borrower must reimburse the Seller.

109-112. These line items reimburse the Seller for any additional items such as property taxes, homeowners’ association dues, and condominium fees that have been paid in advance. The Borrower reimburses the Seller from the day of settlement to the end of the payment period.  

120. Gross Amount Due From Borrower:  The amount due from the Borrower before any credits are issued.  It is the sum of Lines 100-112.

200. Amounts Paid By Or In Behalf Of Borrower

201. Deposit or earnest money: The Borrower’s deposit presented at the time of contract.

202. Principal amount of new loan(s): The amount of principal due on a Borrower’s new loan or loans.

203. Existing loan(s) taken subject to: This line item is used only if the Borrower is assuming the balance of Seller’s loan.

204-209. These line items are for credits to the Borrower from the Seller, lender, or other entities and may be left blank.

Adjustments For Items Unpaid by Seller

210-212. City/town taxes; County taxes; Assessments: These line items reimburse the Borrower for taxes and assessments the Seller has not paid.

213-219. These line items reimburse the Borrower for charges the Seller has not paid and may be left blank. The Seller credits the Borrower for the period from the last payment due date through the settlement date. Typical items include water, ground rent, front foot benefits, homeowners’ association dues, or condominium fees.

220. Total Paid By/For Borrower: The sum of Lines 200-219.

300. Cash At Settlement From/To Borrower

301. Gross Amount due from Borrower: The amount carried from Line 120.

302. Less amounts paid by/for Borrower: The amount carried from Line 220.

303. Cash From/To Borrower: The amount the Borrower needs at settlement in the form of a cashiers or bank check made payable to the Borrower.  

K. Summary of Seller’s Transaction
400. Gross Amount Due To Seller

401. Contract sales price: See Line 101.

402. Personal property: See Line 102.

403-405. These line items are any credits due to the Seller and may be left blank.

Adjustments for Items Paid by Seller in Advance

406-408. City/town taxes; County taxes; Assessments: The reimbursements to the Seller from the Borrower for taxes and assessments the Seller has paid in advance.

409-412. These line items reimburse the Seller for any additional items such as property taxes, homeowners’ association dues, and condominium fees that have been paid in advance. The Borrower reimburses the Seller from the day of settlement to the end of the payment period

420. Gross Amount Due To Seller: The amount due to the Seller before any reductions.  It is the sum of Lines 400-412

500. Reductions In Amount Due To Seller

502. Settlement charges to Seller: The charges carried over from Page 2, Line 1400.

503. Existing loan(s) taken subject to:  This line item is used only if the Borrower is assuming the balance of Seller’s loan.

504. Payoff of first mortgage loan: The payoff amount of the Seller’s current mortgage.

505. Payoff of second mortgage loan: The payoff amount of the Seller’s current second mortgage.

506-509. These line items are other reductions to the Seller and typically include Seller credit for Borrower closing costs, security deposit, or repair escrows.

Adjustments for items unpaid by Seller

510-512. City/town taxes; County taxes; Assessments: These line items reimburse the Borrower for taxes and assessments the Seller has not paid.

513-519. These line items are to reimburse the Borrower for outstanding charges. The Seller credits the Borrower for the period from the last payment due date through the settlement date. Typical items include water, ground rent, front foot benefits, homeowners’ association dues, or condominium fees.

601. Gross Amount due to Seller:  The amount carried from line 420.

602. Less reductions in amount due to Seller:  The amount carried from 520.

603. Cash To/From Seller: The Seller’s net proceeds from the sale of property that is given to the Seller at settlement
 
L. Settlement Charges
700. Total Sales/Broker’s Commission based on price: The total dollar amount of the real estate broker’s sales commission that is typically a percentage of the sales price and usually paid by the Seller.

701-702. These line items represent the detailed division of commission between real estate brokers.

703. Commission paid at Settlement: The total commission paid to real estate brokers usually by the Seller.

704. This line item contains additional real estate broker fees and may be left blank.

800. Items Payable In Connection with Loan

801. Loan Origination Fee: A fixed amount or a percentage of a loan that covers the lender’s administrative and processing cost.  Lenders occasionally charge upfront fees, whether application or underwriting, either in place of or in addition to the origination fee.  Each loan and lender vary but all upfront charges are typically nonrefundable at or after closing.

802. Loan Discount: A one-time charge a lender or broker imposes to lower an interest rate.  Sometimes referred to as “buying down the rate” and otherwise known as “discount points” where each "point" is equal to one percent of the loan amount.  These discounts are generally better for long mortgages and are collected at closing.

803. Appraisal Fee: A charge for an appraiser’s report to determine the market value of the property.  The appraisal’s estimated home worth is needed in order for a lender to approve a home loan.

804. Credit Report: A fee for the cost of a personal credit report the lender uses to determine loan approval and amounts.  The report often includes your credit score, which allows the lender to guage a Borrower’s ability and willingness to repay the loan. A high credit score indicates a better risk and results in a more favorable loan.

805. Lender’s Inspection Fee: A charge for inspections by lender employees or outside inspectors, often of newly constructed housing.

806. Mortgage Insurance Application Fee: A fee for processing a mortgage insurance application, which some private mortgage insurers waive. With an FHA-insured or VA-guaranteed loan, this line may be used for other fees.

807. Assumption Fee: A fee charged when a Borrower “assumes” or takes over the duty to pay the Seller’s existing mortgage loan.

808-811. These line items contain additional lender fees and may be left blank.  Mortgage broker fees for helping the Borrower shop for financing are usually included here. Another fee in this section may be a yield spread premium (YSP), which a funding lender pays to the loan originator for securing the Borrower.  

900. Items Required By Lender To Be Paid In Advance

901. Interest: The amount the Borrower must pay to a lender at settlement for the interest that accrues on a loan between the date of settlement and the first monthly payment.  After closing, interest accrues and is paid as part of the monthly loan installments.

902. Mortgage Insurance Premium: The amount a lender may require the Borrower to pay in advance at settlement usually equivalent to either the first year’s mortgage insurance premium or a lump sum premium that covers the life of the loan.  Mortgage insurance or funding fees for government loan programs, such as FHA (federally insured) or VA (guaranteed), appear here as well.

903. Hazard Insurance Premium: A premium a lender will require the Borrower to pay at settlement for hazard insurance usually equivalent to the cost of the first year’s policy or the first year’s premium.  This premium may also be paid prior to settlement by the Borrower (POC).  Generally referred to as homeowner's insurance, it covers fire, windstorms, and natural hazards.

904-905. These line items contain any additional items the lender requires to be paid in advance, such as flood insurance, and may be left blank.

1000. Reserves Deposited With Lender

1001-1005. Hazard insurance; Mortgage insurance; City property taxes; County property taxes; Annual assessments: These line items represent the escrow account deposits and identify the payment of insurance, taxes, and assessments that must be made at settlement to set up an escrow account.

1006-1008. These line items represent other escrow account deposits not listed in Lines 1001-1005 that must be paid at settlement to set up an escrow account.  Borrowers should ask lenders about these items before closing.

1100. Title Charges: The charges for a variety of services performed by title and other companies that provide title related services.

1101. Settlement or closing fee: A fee paid to a settlement agent or escrow holder.  It includes preparing documents, calculating figures, and administering document execution at closing. Although the buyer and seller usually split the fee, it can be negotiated as part of the sales contract.

1102-1104. Abstract or title search; Title examination; Title insurance binder: The charges for title search, examination and title insurance binder preparation.  The documentation these items produce ensure the absence of pre-existing problems when you purchase your property.

1105. Document preparation: A fee that some lenders or title companies charge to cover costs to prepare final legal papers such as a mortgage, deed of trust, note, or deed.  Typically, if a lender requires this fee it appears in the 800 section

1106. Notary fees: The fees to have a licensed notary public swear that the persons named in the documents did, in fact, sign them.

1107. Attorney’s fees: The legal fees that may include costs for the Borrower, Seller, or lender’s attorneys if they choose their own legal representation to prepare and record legal documents for closing.

1108. Title insurance: The total cost of owner’s and lender’s title insurance policies and may include the optional homeowner’s policy.  The sales price establishes the owner’s policy cost while the loan amount determines the lender’s.  Recently-insured properties may be eligible for policies discounted at reissue rates.

1109. Lender’s coverage: The cost of the lender’s title insurance policy.

1110. Owner’s coverage: The cost of the owner’s title insurance policy.

1112-1113. These line items contain any additional title charges and may be left blank.

1200. Government Recording and Transfer Charges

1201. Recording fees: The fees, usually paid by the Borrower, for recording the new deed and mortgage.  It is paid to a government institution for publicly recording the ownership change at the county courthouse or other local government recording office.

1202-1203. City/county tax/stamps; State tax/stamps: The amount due for taxes and stamps some localities may require, including transfer taxes that are collected whenever property changes hands or a mortgage loan is made.  These fees may be paid or split by the Borrower and/or Seller depending upon the agreement of sale and are usually based on the loan amount and purchase price.

1204-1205. These line items contain any additional governmental fees and may be left blank.

1300. Additional Settlement Charges

1301. Survey: A fee usually charged to the Borrower for a property survey that a lender may require to verify property size, boundaries, encroachments, setback violations, and various material issues.

1302. Pest inspections: A fee for termite or other pest inspections to ensure the property is free from infestation.

1303-1305. These line items include fees for inspections or evaluations such as lead-based paint, hazard, and risk assessments and may be left blank.

1400. Total Settlement Charges: The sum of all fees in the 700-1300 Sections that is carried over to Page 1 - Borrower charges to Line 103 and Seller charges to Line 502.  Some items may be paid outside of closing (POC) and are not included in these totals.