HUD-1 Settlement Statement

The HUD-1 Settlement Statement usually contains 2 to 3 pages. Each page is divided into 2 columns with the left column for the buyer or borrower and the right column for the seller. If the transaction is a re-finance of an existing loan, the right column is sometimes eliminated on a special form of the settlement statement so that only the borrowers costs are shown.

Second Page First

I have always started explaining the HUD-1 settlement statement with the second page. This makes the explanation flow easier because it list the costs associated with the transaction. Most of the questions you will see involve the costs. So when explaining this form, it is best to get the costs out of the way early. Then you can move on to the rest of the documents in the closing package.

At any rate, the costs on the second page of the HUD-1 are broken down into sections. Click here to see a listing of the sections. Each section of numbers are groups of costs related to each other (somewhat). To the right of the numbers are listed the costs in 2 columns, one for the buyer and one for the seller. These costs are then added together and totaled at the bottom of the page. This total cost is then brought forward to the first page and added to the respective columns for buyer and seller.

The costs on the second page are fairly self explanatory. Questions arise generally about who pays the costs and how much, not what are the costs. Many times there is a missing cost or an unexpected cost. This is common and HUDs are sometime changed up to the last second. Many times, they are changed at the closing.

The only exception to this is the "aggregate adjustment" found in the escrow section (usually line 1008). This is because the aggregate adjustment is usually a negative number (actually it is always a negative number). This negative number is an attempt to adjust the escrow reserves for taxes and insurance so the lender is not collecting more than necessary to pay these bills when they come due. This is a formula, or series of formulas, that are used by the lender to calculate the adjustment.

Sometimes you will see a cost listed as "POC." This stands for "Paid Outside Closing." These are costs associated with the transaction and need to be listed on the settlement statement but have been paid before the closing by one of the parties. You will see this often.

First Page Second

When the loan costs are tallied at the bottom of page 2, they are brought forward to page one. Notice that the 2 column structure is maintained on the first page. Left column for buyer and right column for seller. Costs are added to the buyers purchase price and subtracted from the sellers funds.

Also added and subtracted are the prorated portion of the taxes. Unless you purchase the property on January 1 of the year, you will have to calculate the prorated portion of the taxes for the year.

Adjustments for seller paid or buyer paid costs are also added to the first page (although they can be made on the second page as well).

Page one is also where the summary and bottom line of the transaction occurs (lines 303 and 603). Each column is totaled and the bottom line for each party is at, well, the bottom. There the buyer can see how much money he is to bring to the closing and the seller can see what he will receive from the sale.

The Elusive Third Page

Yes, there is a third page. It contains additional costs that would not fit on page 2 of the HUD-1 as well as a statement that they parties have read and understand the Settlement Statement. Again, there are (you guessed it) 2 columns for buyer and seller.

These columns are totaled and brought forward to the second. You can see them at the very bottom of the page in the "catch all" section.

The HUD-1 is a form that takes a little time to get used to using. But once you see a few of them, it becomes a very logical form. Not perfect, but logical enough to explain the financial portion of the transaction.


I have linked to a settlement statement for you to review. Warning...do not try and use this form on your own if you are not experienced in its use. Use an attorney or settlement agent to help you. Also, if you have any questions, feel free to Contact Us

HUD-1 printable form is Here.

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