Understanding the HUD Settlement Statement

Escrow Officers usually start with page 2 of the closing statement. This shows the breakdown of closing costs for both buyer and seller. The first page summarizes the totals to come up with the bottom lines for buyer and seller.

The tax proration is what is charged to the seller for the property taxes incurred from January 1 through the date of closing. Divide the annual taxes by 365 and multiply by the number of days from January 1 through closing. This is a debit to the seller and a credit to the buyer (this occurs when the closing is before the current year's taxes are due-usually in October).

When the closing occurs after the taxes for the current year come out, the seller is charged with the full year's taxes. A reverse tax proration is done where the buyer is debited with the taxes from the day after closing to the end of the year. The seller is given a credit for the same.

The Mortgagees Title Policy premium varies depending on what coverage the lender requires.

The Owners Title Policy premium is based on the sales price and can be obtained from the rate sheet.

The Owners Title Policy is usually paid for by the seller and gives title coverage to the buyer. The Mortgagees Title Policy is usually paid for by the buyer and gives coverage to the lender.

The payoff (amount of money owed by seller to their existing lien holder) consists of both unpaid principal balance AND interest through the day the lender receives the check. If the payoff seems higher to the seller than they think it should be, generally the information they have is the unpaid principal balance only (they are not figuring in the interest).

IF THE SELLER HAS AN FHA LOAN, THE PAYOFF CHECK MUST BE RECEIVED BY THE LIEN HOLDER NO LATER THAN THE FIRST BUSINESS DAY OF THE MONTH OTHERWISE THE SELLER HAS TO PAY AN ADDITIONAL MONTH OF INTEREST (SEVERAL HUNDRED DOLLARS). IF FOR NO OTHER REASON, THIS IS WHY YOU SHOULD NOT CLOSE ON THE LAST DAY OF THE MONTH.

Closing Statement Checklist - What to look for when you review your HUD:

When you see your closing statement, whether you get a fax the day before closing or it's handed to you at the closing table, there are few TOP PRIORITY things to double-check. Of course, the title company and lender are part of the quality-control process, but you may not always be working with the title and mortgage professionals you most trust - and you deserve the best diligence.

Bring this list with you (okay, hide it under the table if you want ...) and make sure any changes are identified BEFORE the transaction is closed. Be sure any terms written in the special provisions of the contract are taken care of on the HUD if applicable. Of course, all items on the closing statement are important, but these are areas where mistakes commonly occur that can really slow things down:

PAGE 1

Spelling of your clients name(s) (Section D)

Property address (Section G)

Name of lender, if any (Section F)

Sales price (line 101)

CREDIT for earnest money and option fees (Section 200)

Loan amount, if any (line 202)

CREDIT for property tax paid by Seller (lines 210-214)

CASH DUE AT CLOSING (line 303)

PAGE 2

Escrows for taxes/insurance/PMI/MIP (Section 1000 - NOTE: if your client makes a substantial down payment, they may not be required to set up escrows for these) PAGE 1

Spelling of your clients' name(s) (Section E)

Property address (Section G)

Sales price (line 401)

Existing loan payoff(s), if any (Section 500)

Property tax paid by Seller (lines 510-514)

CASH DUE TO/FROM SELLER AT CLOSING (line 603) PAGE 2

COMMISSION (Section 700)

Loan charges paid by Seller, if any (Section 800)

One year service warranty - if required per contract (Section 1300)

Independence Title

*Vallure Realty provides Austin Real Estate homes for sale through the mls and resources to help homeowners and homebuyers selling and buying a home, condo, townhome or other property in Austin, TX. Vallure Realty can provide you with a comparative market analysis of your home and listings of current Austin Texas Real Estate for sale on the Austin MLS and Realtor.com. Vallure Realty, as a discount realtor, also provides services, which save you thousands of dollars in Real Estate commissions when buying and selling your home. Some of the many services we offer are Austin MLS Full Service One Percent Listing, Austin Flat Fee MLS listing, Buyer Rebates and For Sale By Owner tools. This website, www.nicolepeel.com, contains articles and links regarding Real Estate in Austin, and other detailed information to help guide you through the Real Estate transaction. Vallure Realty also provides an Austin Real Estate Guide to consumers looking for houses or selling their home in Austin, such as mortgage tools, foreclosure and HUD listings, relocation guides, For Sale By Owner assistance, Austin facts, and other tools.*

Understanding the HUD Settlement Statement

Closing Statement Checklist - What to look for when you review your HUD:

DIRECTORY of Useful Web Resources

DIRECTORY of National Real Estate Agents and Resources