Definition:
The HUD-1 Settlement Statement is a detailed document that lists all the final costs, fees, and credits for both the buyer and seller in a real estate transaction. It shows exactly how much money is being paid and to whom at closing.
Example:
When Robert sells his home, he receives a HUD-1 Settlement Statement before closing. The form outlines the sale price, real estate agent commissions, taxes, and how much he’ll walk away with after paying off his mortgage and closing costs.
Explanation:
The HUD-1 was traditionally used in most real estate closings to itemize every financial detail of the transaction. It includes:
- Purchase price
- Loan amount
- Title insurance fees
- Appraisal and inspection costs
- Realtor commissions
- Property taxes
- Seller credits or concessions
- Final amounts due from or to the buyer and seller
Each charge is listed in a clear, line-by-line format. Both the buyer and seller receive a copy of the HUD-1 to review and sign at or before closing.
Since 2015, the HUD-1 has been replaced by the Closing Disclosure form for most residential real estate transactions involving a mortgage, as part of the TILA-RESPA Integrated Disclosure (TRID) rule. However, the HUD-1 is still used in all-cash deals, reverse mortgages, and some other transactions not covered by TRID.
Why is HUD-1 Settlement Statement Important in Real Estate Transactions?
The HUD-1 is important because it provides a complete breakdown of where every dollar goes in a real estate deal. For buyers and sellers, it ensures full transparency and confirms the final financial terms before closing. Understanding the HUD-1 (or its modern replacement, the Closing Disclosure) helps prevent confusion and protects all parties from unexpected fees or mistakes.