Finally, you've gone through the whole process, and you're ready to go to "settlement" or
"closing." We know you'll be excited, but be sure to read
everything you sign! It's often a good idea to read the settlement papers
in advance of your settlement date. It is extremely difficult, and often
impossible, to change the papers on settlement day.
Settlement practices vary from locality to locality, and
even within the same county or city. Settlements may
be conducted by lenders, title insurance companies,
escrow companies, real estate brokers or attorneys for
the buyer or seller. You may save money by shopping
for the settlement agent.
A.
Specific Settlement Costs This
part of the Booklet discusses the settlement services which you
may be required to get and pay for and which are itemized in Section
L of the HUD-1 Settlement Statement. You also will find a sample
of the HUD-1 form to help you to understand the settlement transaction. When
shopping for settlement services, you can use this section as a
guide, noting on it the possible services required by various lenders
and the different fees quoted by service providers. Settlement costs
can increase the cost of your loan, so compare carefully. 700.
Sales/Broker's Commission: This is the total dollar
amount of the real estate broker’s sales commission, which
is usually paid by the seller. This commission is typically a percentage
of the selling price of the home. 800.
Items Payable in Connection with Loan: These are the
fees that lenders charge to process, approve and make the mortgage
loan: 801.
Loan Origination: This fee is usually known as a loan origination
fee but sometimes is called a "point" or "points."
It covers the lender's administrative costs in processing the loan.
Often expressed as a percentage of the loan, the fee will vary among
lenders. Generally, the buyer pays the fee, unless otherwise negotiated. 802.
Loan Discount: Also often called "points" or "discount
points," a loan discount is a one-time charge imposed by the
lender or broker to lower the rate at which the lender or broker
would otherwise offer the loan to you. Each "point" is
equal to one percent of the mortgage amount. For example, if a lender
charges two points on a $80,000 loan this amounts to a charge of
$1,600. 803.
Appraisal Fee: This charge pays for an appraisal report made
by an appraiser. 804.
Credit Report Fee: This fee covers the cost of a credit report,
which shows your credit history. The lender uses the information
in a credit report to help decide whether or not to approve your
loan and how much money to lend you. 805.
Lender's Inspection Fee: This charge covers inspections, often
of newly constructed housing, made by employees of your lender or
by an outside inspector. (Pest or other inspections made by companies
other than the lender are discussed in line 1302.) 806.
Mortgage Insurance Application Fee: This fee covers the processing
of an application for mortgage insurance. 807.
Assumption Fee: This is a fee which is charged when a buyer
"assumes" or takes over the duty to pay the seller’s
existing mortgage loan. 808.
Mortgage Broker Fee: Fees paid to mortgage brokers would be
listed here. A CLO fee would also be listed here.
900.
Items Required by Lender to Be Paid in Advance: You may
be required to prepay certain items at the time of settlement, such
as accrued interest, mortgage insurance premiums and hazard insurance
premiums. 901.
Interest: Lenders usually require borrowers to pay the interest
that accrues from the date of settlement to the first monthly payment. 902.
Mortgage Insurance Premium: The lender may require you to pay
your first year’s mortgage insurance premium or a lump sum
premium that covers the life of the loan, in advance, at the settlement. 903.
Hazard Insurance Premium: Hazard insurance protects you and
the lender against loss due to fire, windstorm, and natural hazards.
Lenders often require the borrower to bring to the settlement a
paid-up first year’s policy or to pay for the first year's
premium at settlement. 904.
Flood Insurance: If the lender requires flood insurance, it
is usually listed here.
1000
- 1008. Escrow Account Deposits: These lines identify
the payment of taxes and/or insurance and other items that must
be made at settlement to set up an escrow account. The lender is
not allowed to collect more than a certain amount. The individual
item deposits may overstate the amount that can be collected. The
aggregate adjustment makes the correction in the amount on line
1008. It will be zero or a negative amount.
1100.
Title Charges: Title charges may cover a variety of services
performed by title companies and others. Your particular settlement
may not include all of the items below or may include others not
listed. 1101.
Settlement or Closing Fee: This fee is paid to the settlement
agent or escrow holder. Responsibility for payment of this fee should
be negotiated between the seller and the buyer. 1102-1104.
Abstract of Title Search, Title Examination, Title Insurance Binder:
The charges on these lines cover the costs of the title search and
examination. 1105.
Document Preparation: This is a separate fee that some lenders
or title companies charge to cover their costs of preparation of
final legal papers, such as a mortgage, deed of trust, note or deed. 1106.
Notary Fee: This fee is charged for the cost of having a person
who is licensed as a notary public swear to the fact that the persons
named in the documents did, in fact, sign them. 1107.
Attorney's Fees: You may be required to pay for legal services
provided to the lender, such as an examination of the title binder.
Occasionally, the seller will agree in the agreement of sale to
pay part of this fee. The cost of your attorney and/or the seller’s
attorney may also appear here. If an attorney's involvement is required
by the lender, the fee will appear on this part of the form, or
on lines 1111, 1112 or 1113. 1108.
Title Insurance: The total cost of owner's and lender's title
insurance is shown here. 1109.
Lender's Title Insurance: The cost of the lender’s policy
is shown here. 1110.
Owner's (Buyer’s) Title Insurance: The cost of the owner's
policy is shown here.
1200.
Government Recording and Transfer Charges: These fees may
be paid by you or by the seller, depending upon your agreement of
sale with the seller. The buyer usually pays the fees for legally
recording the new deed and mortgage (line 1201). Transfer taxes,
which in some localities are collected whenever property changes
hands or a mortgage loan is made, can be quite large and are set
by state and/or local governments. City, county and/or state tax
stamps may have to be purchased as well (lines 1202 and 1203).
1300.
Additional Settlement Charges: 1301.
Survey: The lender may require that a surveyor conduct a property
survey. This is a protection to the buyer as well. Usually the buyer
pays the surveyor's fee, but sometimes this may be paid by the seller. 1302.
Pest and Other Inspections: This fee is to cover inspections
for termites or other pest infestation of your home. 1303-1305.
Lead-Based Paint Inspections: This fee is to cover inspections
or evaluations for lead-based paint hazard risk assessments and
may be on any blank line in the 1300 series.
1400.
Total Settlement Charges: The sum of all fees in the borrower's
column entitled "Paid from Borrower's Funds at Settlement"
is placed here. This figure is then transferred to line 103 of Section
J, "Settlement charges to borrower" in the Summary
of Borrower's Transaction on page 1 of the HUD-1 Settlement
Statement and added to the purchase price. The sum of all of the
settlement fees paid by the seller are transferred to line 502 of
Section K, Summary of Seller's Transaction on page 1 of the
HUD-1 Settlement Statement.
Paid
Outside Of Closing ("POC"): Some fees may be
listed on the HUD-1 to the left of the borrower’s column and
marked "P.O.C." Fees such as those for credit reports
and appraisals are usually paid by the borrower before closing/settlement.
They are additional costs to you. Other fees such as those paid
by the lender to a mortgage broker or other settlement service providers
may be paid after closing/settlement. These fees are usually included
in the interest rate or other settlement charge. They are not an
additional cost to you. These types of fees will not be added into
the total on Line 1400.
700.
TOTAL SALES/BROKER’S COMMISSION based on price $ @ %=
PAID
FROM BORROWER’S FUNDS AT SETTLEMENT
PAID
FROM SELLER’S FUNDS AT SETTLEMENT
Division
of Commission (line 700) as follows:
701.
$ to
702.
$ to
703.
Commission paid at Settlement
704.
800.
ITEMS PAYABLE IN CONNECTION WITH LOAN
801. Loan Origination Fee %
802. Loan Discount %
803. Appraisal Fee to
804. Credit Report to
805. Lender’s Inspection Fee
806. Mortgage Insurance Application Fee to
807. Assumption Fee
808. Mortgage Broker Fee
809.
810.
811.
900. ITEMS REQUIRED BY LENDER TO BE PAID IN ADVANCE
901. Interest from to @$ /day
902. Mortgage Insurance Premium for months to
903. Hazard Insurance Premium for years to
904. years to
905.
1000. RESERVES DEPOSITED WITH LENDER
1001. Hazard Insurance months @ $ per month
1002. Mortgage insurance months @ $ per month
1003. City property taxes months @ $ per month
1004. County property taxes months @ $ per month
1005. Annual assessments months @ $ per month
1006. months @ $ per month
1007. months @ $ per month
1008. Aggregate Adjustment
1100. TITLE CHARGES
1101. Settlement or closing fee to
1102. Abstract or title search to
1103. Title examination to
1104. Title insurance binder to
1105. Document preparation to
1106. Notary fees to
1107. Attorney’s fees to
(includes
above items numbers; )
1108. Title Insurance to
(includes
above items numbers; )
1109. Lender’s coverage $
1110. Owner’s coverage $
1111.
1112.
1113.
1200. GOVERNMENT RECORDING AND TRANSFER CHARGES
1201. Recording fees: Deed $ ; Mortgage $ ; Releases $
1202. City/county tax/stamps: Deed $ ; Mortgage $
1203. State tax/stamps: Deed $ ; Mortgage $
1204.
1205.
1300. ADDITIONAL SETTLEMENT CHARGES
1301. Survey to
1302. Pest inspection to
1303.
1304.
1305.
1400. TOTAL SETTLEMENT CHARGES (enter on lines 103,
Section J and 502, Section K)