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HUD-1 Form Tip Sheet

Right At Home Daily: Take It And Run: Legal
By Samuel J. Tamkin

In 1974, Congress passed the Real Estate Settlement Procedures Act, also known as RESPA. The Act was designed to give consumers more power during the process of buying and selling their homes. Today, RESPA is regulated by the Department of Housing and Urban Development (HUD).

Various provisions in the Act prohibit kickbacks between real estate closing service providers, such as mortgage lenders to real estate agents, and require lenders to give prospective borrowers a copy of a HUD information booklet within 3 days of receiving the loan application. Lenders must also give the buyer a good-faith estimate of what the buyer's closing costs will be relative to their loan. (This estimate should be extremely close, if not completely identical to the final cost for your home loan.)

Lenders are also required to disclose where the money comes from and to whom it goes during the buying and selling process. As a buyer or seller, you will see a "HUD-1" form, which itemizes the buyers and sellers costs side by side.

When reviewing the HUD-1, here are some things to think about:

1. The "Summary of a Borrower's Transaction" indicates the contract sales prices. Your earnest money, and any city, county, and state real estate taxes owed by you should also be listed. In the area designated "Amounts paid by or on behalf of the borrower," you should see a list of items including the loan being given to you and a total of charges from the second page. At the bottom, you'll see the amount of cash you'll need to close your deal.

2. The second page of the HUD-1 details what closing costs the buyer and seller are paying, and to whom. You may see your home inspection or appraisal fees listed, if they are to be paid at the closing. All of your loan charges should be listed, as well as transfer taxes, recording fees, title company charges and escrow agent closing fees. If any of these fees are inaccurate, speak up before you close. If you are using a real estate attorney, consult with the attorney. If not, talk to your closing officer about any loan charges that seem inaccurate.

3. The HUD-1 form also enumerates the seller's costs in the transaction, including the contract sales price, closing costs, the payoff of the seller's mortgage and any home equity loan, the earnest money you put down, sometimes with interest, and the cost of any title insurance. There may also be adjustments for items unpaid by the seller, such as any city, county, or state real estate property taxes. The bottom line indicates how much cash the seller will receive from the deal.

4. A separate page, which isn't technically part of the HUD-1 statement but is sometimes given out by title or escrow companies, looks at disbursements — or, who gets what cash. This sheet will list the various checks that are written out of the closing funds.

5. When you're ready to apply for your loan, start a file that contains a copy of all the information you've given to your lender, plus whatever paperwork you received in return. If there are errors in the HUD-1, you may need your paperwork, in particular, your Good Faith Estimate of closing charges.

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