Media Coverage
Mortgage Matters
Before closing, carefully examine your HUD settlement statement
Column by Steve Rockefeller, The Virginian-Pilot, June 11, 2005
Thanks to new technology that results in expedited processing, many home mortgage loans are being approved and closed much more quickly than in the past. However, in your haste to complete the process, make sure you take time for a thorough examination of all the closing documents, especially your HUD-1 settlement statement.
Anyone who has bought a house will tell you that the HUD-1 is a very complex document. It provides an itemized listing of the final fees charged in connection with your loan and contains dozens of line items, dollar amounts and calculations detailing who pays for what at the time of closing. These items include things like:
• What the buyer is responsible for paying
• What the seller is responsible for paying
• Premiums for title and hazard insurance
• Taxes
• Attorney’s fees
• Notary fees
• Loan origination fees
If your loan is for a home purchase, the settlement statement will include a listing of any fees related to the transaction between you and the seller. If the loan is a refinance, the settlement statement will show the payoff amounts of any mortgages that will be paid in full with your new loan.
Most items on the statement are numbered according to a standardized system used by all lenders. These numbers correspond to the numbers listed on the Good Faith Estimate that your lender provides in your loan application kit.
The first page of the HUD-1 Settlement Statement summarizes all the costs and adjustments for the borrower and seller. Section J is the summary of the borrower’s transaction and Section K is the summary of the seller’s side of the transaction. If you are the buyer, you may receive a copy of the seller’s side, but it is not required. Section 100 summarizes the borrower’s costs, such as the contract cost of the house, any personal property being purchased, and the total settlement charges owed by the borrower from Section L. Beginning at line 106, adjustments are made for items (such as taxes, assessments, fuel) that the seller has previously paid.
This HUD-1 statement is also commonly known as the closing statement, and both the buyer and seller must sign this document. It is one of the most important documents that you will review and sign at closing. Both the buyer and seller should understand this statement fully before signing it. And to do so, you need adequate time to review it before closing, just in case it contains errors. Although mistakes are rare, you cannot assume that the closing agent is always correct. Mistakes can happen, and I’ve heard of the occasional closing where an error was found within the last minutes of closing.
Stay in touch with your escrow officer, title agency, settlement agent or closing attorney, asking questions and verifying that all the terms and conditions contained in this and other documents are what you expect them to be. You should be able to see a copy of the HUD-1 statement in advance of the closing. Due to recent high volumes of real estate transactions, many home buyers were lucky to see their HUD-1 within minutes of their scheduled closing.
Scott Alperin, attorney with Alperin & Flynn PC indicates, that with loan volumes returning to a market of normalcy, as long as your mortgage is approved in advance of closing, it is not unreasonable to expect your settlement statement a few days ahead of closing. If necessary, take the document home with you and double-check for mathematical or clerical errors. Most buyers and sellers study the statement on their own, with their real estate agent and with the settlement agent. The more people who review it, the more likely that errors will be detected. Ask as many questions as necessary to help you understand all charges. Remember, you are paying for this service. Ask the attorney ahead of the closing if there is a time limit. I have heard of instances where attorneys who juggle many closing will only allot 60 minutes for their closing fee. Again, remember you will be paying your loan back for many years. Make sure you understand all documents.
After closing, it’s important for you to keep the HUD-1 statement for as long as you own the property. It will be useful for income tax purposes when you file your return, and it may also be useful when you sell the house. Many of the items on the statement for tax purposes can be used to reduce any profit you have made when you sell.
Steve Rockefeller is vice president of SunTrust Mortgage’s Virginia Beach office. He is a past president of the Tidewater Mortgage Bankers Association and the Virginia Mortgage Bankers Association. He can be reached at 431-4855 or by e-mail at steve@mloans.com.
