Closing the Deal (Closed Caption)

Uploaded by HUDchannel on 02.11.2010

Hi. I’m Teresa Payne with the U.S. Department of Housing and Urban Development. Buying a
home is one of the most exciting and largest purchases most of us will ever make. To help
you through this process, we’ve put together three videos. They include:
Shopping for your Home,
Shopping for your Loan, and
Closing the Deal
Today we’ll discuss closing the deal or settlement. You have already determined what
you can afford, found the right house, and shopped for the best loan. Now it’s time
to go to settlement . In this video, you will learn about:
the settlement process, the information shown on your HUD-1 Settlement
Statement, and comparing the charges on your HUD-1 Settlement
Statement to the charges shown on your Good Faith Estimate or GFE.
So what is settlement, closing, or escrow? It is called different things in different
parts of the country, but it is essentially the same thing.
Settlement is the time when your property will be formally sold and transferred to you
from the seller. You will sign the loan documents at settlement, pay the closing costs and receive
title of the property from the seller. Sometimes, settlement is done in one day – with everyone
at the same place. And other times, everyone signs separately.
Depending on where you live, your settlement may be conducted by a title insurance company,
an escrow company, your lender or an attorney. Your settlement agent will oversee the legal
documents, fee payments, and other details of transferring the property to make sure
the conditions of the sales contract have been met and the real estate taxes have been
Regardless of who performs the settlement, you will have to sign many important documents.
Make sure you carefully read and understand all the documents before you sign them. Don’t
be afraid to ask the lender any questions you have about your loan documents. You may
also want to hire an attorney to protect your interests at settlement. Also, be sure to
take your Good Faith Estimate to settlement so you can compare the charges on your HUD-1
Settlement Statement with the charges disclosed on your GFE.
Be aware that you may need to bring certain documents to the settlement, like:
evidence of homeowner’s insurance a copy of your pest inspection,
a driver’s license or other legal identification, and
a certified check or wire transfer from your bank to cover any outstanding costs, such
as your down payment.
One of the most important documents at your settlement will be your HUD-1 Settlement Statement,
also known simply as your HUD-1. The HUD-1 is a 3-page form that lists all of the charges
and credits related to your home purchase. The origination and title insurance charges
will likely be the largest of these charges. Make sure you focus on these two items as
you review your HUD 1.
I am closing in a couple days and I'd really like if you could send me a copy of my HUD-1
Settlement Statment to look over so I can review it.
You have a right to inspect the HUD-1 before your settlement occurs. Let your settlement
agent and lender know that you want to receive a completed HUD-1 at least one day before
your settlement. When you receive your copy of the HUD-1, compare the charges listed on
it with the charges listed on your Good Faith Estimate Ask your lender about any changes
in the fees between your GFE and your HUD-1. Your lender may have to reimburse you if charges
on the HUD-1 exceed those initially disclosed on the GFE. Let’s look at a HUD-1 Settlement
Statement. There are a few major things you should focus on.
The first page of the HUD-1 summarizes all of the charges and credits to the buyer and
to the seller. Page 1 also contains information about the
type of loan that you are getting, the names and addresses of the borrower and the seller,
the property address, the name of the settlement agent, the settlement date, and the contract
sales price.
Be sure to look at line 103, the total settlement charges. This is one of the most important
numbers on the HUD – 1, and it is described in more detail on page 2. This section also
lists reimbursements to the seller for things such as property taxes and homeowner association
dues that the seller has paid for in advance. The sales price, settlement charges and reimbursements
to the seller are totaled on Line 120. This reflects the amount you owe.
The next section on the first page includes the amounts that you have already paid or
that someone else will be paying on your behalf - such as the deposit you put down on your
home, your loan amount, and any credits you may be getting from the seller or lender.
There may also be credits for items owed by the seller that are due after settlement,
such as property taxes. These payments and credits are totaled on Line 220.
The amount from Line 220 (your payments and credits) is subtracted from the amount from
Line 120 (the total amount you owe). The remainder is shown on Line 303 which reflects the amount
of money that you must bring to settlement.
We just saw that your settlement charges are shown on Line 103. The 2nd page of the HUD-1
Settlement Statement is a breakdown of those settlement charges into categories called
“series.” The column on the right contains the seller’s charges. The column on the
left shows your charges. Most of these charges will also be on your Good Faith Estimate and
were explained in the video “Shopping For Your Loan.” After we look at these series
of charges, we will compare them to the charges that were shown on your GFE.
The largest part of your settlement costs will be the charges related to the loan and
the charges for title insurance and title services. The 800 series is very important
because it shows the charges that are related to your loan. Next to some of these charges
you will see a reference to a line on your Good Faith Estimate. These are the charges
that will be compared to those shown on your GFE.
Line 801, “Our origination charge,” shows the lender’s and mortgage broker’s charges
for getting you the loan, and Line 802 is the credit or charge for the interest rate
you chose. Line 803 shows “Your adjusted origination charges” after the amount on
Line 802 is added to or subtracted from Line 801. Therefore, Line 803 is really your total
amount due for the loan origination services.
All of the charges for title services and the lender’s title insurance are listed
in the 1100 series. This is usually the second largest cost at closing. Title service fees
include charges for a title search and for the services of a settlement agent. These
charges also include insurance that will protect your lender against any title dispute that
might arise over your property. If you have decided to purchase an owner’s title insurance
policy, that fee will also be shown here.
The charges for recording your deed and mortgage, as well as any transfer taxes that you have
to pay, will be in the 1200 series. Transfer taxes are charged by your state or local government
to transfer the ownership of the property and to place a new mortgage on the property.
The last line on the HUD-1’s 2nd page is the total of all your settlement charges.
Now … let’s go to the 3rd page to see some new, consumer-friendly charts – the
Comparison Chart and the Loan Terms. These charts are designed to help you compare what
was estimated on your GFE and what you will actually pay at settlement.
The Comparison Chart will help you compare the charges disclosed on your GFE and the
actual charges listed on the 2nd page of your HUD-1.
The Loan Terms section can assure you that the loan you applied for is the loan you actually
received at settlement.
Let’s take a look first at the Comparison Chart. This chart has three sections:
charges that cannot increase at settlement charges that in total cannot increase more
than 10% in total, and charges that can change.
Compare the charges listed in the GFE column with the charges in the HUD-1 column. If the
lender has exceeded the allowable limits or tolerances, then the difference must be reimbursed
to you at closing or within 30 days.
Carefully compare each charge to make sure that the lender has not exceeded the tolerance
limits. If they have, give us a call, and we will be more than happy to contact your
lender for you.
The last chart on your HUD-1 clearly sets forth the terms of your loan, including the
loan amount, your interest rate and your monthly loan payments. Please look at this information
carefully and make sure that you are getting the loan and the terms that were set forth
in your GFE. If the loan terms do not match, or if you have any questions about the loan,
contact the lender before signing any documents.
Let’s wrap up. What have we learned so far? We discussed what will happen during the settlement
process, what information should be on your HUD-1 Settlement Statement and how to compare
it to your Good Faith Estimate.
So what’s next? You go to settlement, sign several documents, and receive the keys to
your new home.
After settlement, you will send your monthly mortgage payments to a loan servicer.
And be assured that if you have any questions about the servicing of your loan, your loan
servicer is legally required to respond to your questions.
In most transactions, the lender should give you a copy of “Shopping For Your Home Loan
– HUD’s Settlement Cost Booklet” when you apply for your loan. It is also available
on HUD’s web site. Don’t forget that this is a great reference tool you can use during
the settlement process.
I hope that you have found this video helpful. For additional information and to access this
video or the first 2 videos in the series, please visit our website at
Congratulations. You are now a homeowner!