The Hud-1 Settlement Statement Explained: Fill & Download for Free

Here's a step-by-step guide for getting a mortgage, from figuring out affordability to the closing, the MortgageHippo way:1 Determine how much home you can qualify for and how much home you can afford (they're not the same thing): Before you even waste time looking at homes, find out how much loan you can qualify for. Your mortgage professional can guide you through this analysis. It helps to have the following information handy (for you and your co-borrower, if applicable): income, monthly debts, your assets (to cover down payment and closing costs) and credit score.Unlike determining how much you qualify for – which is based on objective mortgage guidelines and financial ratios – figuring out how much you can afford requires a thorough examination of your situation. What kind of lifestyle do you lead? Do you like to travel and dine out often or are you more of a homebody? Only you know what your monthly expenses really are (above and beyond what shows up on your credit report) and how much you can afford to pay monthly for your new home.2 Get pre-approved: No home seller will consider you a serious buyer if you're not pre-approved. In fact, most real estate agents won't begin working with you if you're not already pre-approved. A serious pre-approval involves an in-depth self-assessment of your financial situation and a thorough conversation with a mortgage professional to discuss your options. The following things are typically needed from you at this point:Pay stubs, W-2s, tax returns and bank statements to verify your income and assets (some of these depend on whether you're an employee or self-employed)Permission for your mortgage professional to pull your credit and verify your credit score and debts.3 Find a home: With your pre-approval in hand, you are now ready to get out there, find your dream home, and successfully negotiate a purchase offer. We recommend working with a good real estate agent who will not only help you identify a property but will also work with you to structure the purchase offer and negotiate a solid purchase contract. As soon as you have a purchase contract signed and agreed by all parties, you should send it to your mortgage professional. Having a purchase contract in place is the trigger that allows you to start the mortgage application process.4 Submit your initial application to the lender: In addition to the fully executed purchase contract, most lenders will require the following documents before giving you a preliminary approval: * 1003 Mortgage Application: Our recommendation is to work on your 1003 application while you're looking for a home (during step #3). That way it's ready to be submitted once you identify your property and update the application with the property information required.Signed initial disclosure package: Your mortgage professional is responsible for providing you multiple disclosures required by law – both federal and state-specific. Some examples of these disclosures are the Good Faith Estimate and the Truth-in-Lending Statement.Complete set of documents verifying your income, assets and overall health of your finances: Those documents include but are not limited to: pay stubs, W2s, tax returns, and account statements.5 Allow the lender to process your loan: With the initial application packet submitted, the lender can start working on your loan, verifying all of the information provided in the application, ordering the appraisal and property title report. That work is done by a processor, and once he or she feels they have a solid file, it is sent to the underwriter for review. Sit back, relax, and don't forget to go grocery shopping. Your loan should be conditionally approved soon.6 Clear conditions to close: "Conditions to close" are requirements the underwriter places on your loan application before giving it its final stamp of approval. Not to fret -- this is typical of all mortgage applications. At this point, the process becomes very specific to each borrower; the lender will ask for documents relevant only to your personal circumstances.For example, if you've been divorced, the lender will probably ask for a divorce decree. Other requests we typically see at this point are the following:Letters of explanation: If, for example, you've had a large deposit in your bank account recently, the lender will want an explanation for that deposit (i.e. where it came from and what it was for).Information about other financed propertiesA clarification regarding items on the credit reportKeep in mind that a lot of these documents can and should be obtained at the point of loan application and submitted to the underwriter in anticipation of being needed. An experienced mortgage professional and a good processor should work together on identifying those items upfront so that the process later on is a lot smoother.7 Closing: Get your signature hand ready because you'll be doing a lot of signing, but make sure you understand what it is that you're signing. Don't let the process overwhelm you and definitely don't let anyone rush you or pressure you into signing something with which you don't feel comfortable. The lawyer or agent conducting the closing should carefully explain everything to you. And if you have your own lawyer, even better. You may even request copies of the documents you'll be signing before the closing so you and your lawyer (if you have one) have time to carefully review them beforehand.These are some of the documents you can expect to sign at closing:The deed – transfers the property from the seller to the buyer and determines the form of ownership in which you take title (e.g. individually, joint tenants in common, in trust, etc.).The bill of sale – transfers the personal property being sold with the house, such as the HVAC unit or security systems.The HUD-1 – settlement statement that shows all the money transfers at closing.The note – evidences your debt to the lender and states the details of the loan (interest rate, repayment term, etc.)The mortgage – states the terms of the lender's interest in your property (since the property is collateral for the loan), including, for example, the lender's right to foreclose upon the property if you don't make your loan payments.8 Move into your new home: You're at the homestretch now! If at all possible, hire professional movers, and that doesn't include friends (unless you're willing to sacrifice some valuable friendships). Remember to change your address with the post office and other important service providers such as banks, credit cards, and, of course, Netflix. Enjoy your new home!

1. Determine how much home you can qualify for and how much home you can afford (they're not the same thing): Before you even waste time looking at homes, find out how much loan you can qualify for. Your mortgage professional can guide you through this analysis. It helps to have the following information handy (for you and your co-borrower, if applicable): income, monthly debts, your assets (to cover down payment and closing costs) and credit score.Unlike determining how much you qualify for – which is based on objective mortgage guidelines and financial ratios – figuring out how much you can afford requires a thorough examination of your situation. What kind of lifestyle do you lead? Do you like to travel and dine out often or are you more of a homebody? Only you knows what your monthly expenses really are (above and beyond what shows up on your credit report) and how much you can afford to pay monthly for your new home.2. Get pre-approved: No home seller will consider you a serious buyer if you're not pre-approved. In fact, most real estate agents will not even start working with you if you're not pre-approved. A serious pre-approval involves an in-depth self-assessment of your financial situation and a thorough conversation with a mortgage professional to discuss your options. The following things are typically needed from you at this point:Pay stubs, W-2s, tax returns and bank statements to verify your income and assets (some of these depend on whether you're an employee or self-employed)Permission for your mortgage professional to pull your credit and verify your credit score and debts.3. Find a home: With your pre-approval in hand, you are now ready to get out there, find your dream home and successfully negotiate a purchase offer. We recommend working with a good real estate agent who will not only help you identify a property but will also work with you to structure the purchase offer and negotiate a solid purchase contract.As soon as you have a purchase contract signed and agreed by all parties, you should send it to your mortgage professional. Having a purchase contract in place is the trigger that allows you to start the mortgage application process.4. Submit your initial application to the lender: In addition to the fully executed purchase contract, most lenders will require the following documents before giving you a preliminary approval:1003 Mortgage Application: Our recommendation is to work on your 1003 application while you're looking for a home (during stage #3). That way it's ready to be submitted once you identify your property and update the application with the property information required.Signed initial disclosure package: Your mortgage professional is responsible for providing you multiple disclosures required by law -- both federal and state-specific. Some examples of these disclosures are the Good Faith Estimate and the Truth-in-Lending Statement.Complete set of documents verifying your income, assets and overall health of your finances: Those documents include but are not limited to: pay stubs, W2s, tax returns, and account statements.5. Allow the lender to process your loan: With the initial application packet submitted, the lender can start working on your loan, verifying all of the information provided in the application, ordering the appraisal and property title report. That work is done by a processor, and once he or she feels they have a solid file, it is sent to the underwriter for review. Sit back, relax, and don't forget to go grocery shopping. Your loan should be conditionally approved soon.6. Clear conditions to close: "Conditions to close" are requirements the underwriter places on your loan application before giving it its final stamp of approval. Not to fret -- this is typical of all mortgage applications. At this point, the process becomes very specific to each borrower; the lender will ask for documents relevant only to your personal circumstances. For example, if you've been divorced, the lender will probably ask for a divorce decree. Other requests we typically see at this point are the following:Letters of explanation: If, for example, you've had a large deposit in your bank account recently, the lender will want an explanation for that deposit (i.e. where it came from and what it was for).Information about other financed propertiesA clarification regarding items on the credit reportKeep in mind that a lot of these documents can and should be obtained at the point of loan application and submitted to the underwriter in anticipation of being needed. An experienced mortgage professional and a good processor should work together on identifying those items upfront so that the process later on is a lot smoother.7. Closing: Get your signature hand ready because you'll be doing a lot of signing, but make sure you understand what it is that you're signing. Don't let the process overwhelm you and definitely don't let anyone rush you or pressure you into signing something with which you don't feel comfortable. The lawyer or agent conducting the closing should carefully explain everything to you. And if you have your own lawyer, even better. You may even request copies of the documents you'll be signing before the closing so you and your lawyer (if you have one) have time to carefully review them beforehand.These are some of the documents you can expect to sign at closing:The Deed – transfers the property from the seller to the buyer and determines the form of ownership in which you take title (e.g. individually, joint tenants in common, in trust, etc.).The Bill of Sale – transfers the personal property being sold with the house, such as the HVAC unit or security systems.The HUD-1 – settlement statement that shows all the money transfers at closing.The Note – evidences your debt to the lender and states the details of the loan (interest rate, repayment term, etc.)The Mortgage – states the terms of the lender's interest in your property (since the property is collateral for the loan), including, for example, the lender's right to foreclose upon the property if you don't make your loan payments.8. Move into your new home: You're at the homestretch now! If at all possible, hire professional movers, and that doesn't include friends (unless you're willing to sacrifice some valuable friendships). Remember to change your address with the post office and other important service providers such as banks, credit cards, and, of course, Netflix. Enjoy your new home!

Tips on how to make the transition are difficult to define but not impossible.In the litigation field your clients come to you with a pre-defined set of problems, and your practice is actually centered on the discovery process, motion practice and ultimately the settlement of case and or preparation for trial. None of these skills are particularly relevant in the transaction world. The difference is night and day.The first major hurdle to make the transition to transaction work is trying to find clients who are interested in hiring you as a transaction style lawyer. The residential real estate closing work is largely controlled by the banks or other lenders. While the bank isn’t required to use only one lawyer they don’t have to go out of their way to tout another lawyer. The banks generally find a lawyer that fits their needs and tends to send all of their work towards that lawyer. The transaction lawyer is also supported by a title company, either in house or through a rough affiliation with an outside title company. A future transaction lawyer needs to find a bank that will funnel clients towards that lawyer, which is a tough nut to crack and find a title company which will work with the new lawyer as you learn the basics and the more complex aspects of a transaction.Tip 1. Find a bank willing to hire you.Transaction work, largely depends on a contract. In a sense, the lawyer is given a contract, which serves as the recipe for how the transactions is structured and how to close the transaction. A new transaction lawyer needs to become familiar or used to (i) how things are supposed to be done, and (ii) will the contract structure work in the real world.Tip 2. Set through and understand the basics of a transaction. Become familiar with real estate law, title work, title exceptions, how to secure a transaction for your jurisdiction (Deed of Trust vs. Mortgage), and get a basic understanding of promissory notes, and learn the magic and mysteries of a HUD-1, or closing statement and disbursal list.Tip 3. Find another lawyer who can help you through a transaction. Hire them from the outside or associate with them. Then sketch the transaction from beginning to end. Are the taxes paid, how to secure releases for any encumbrances on the property, is the title clear, or is there a problem with the chain of title and design a mechanism for fixing the chain of title. In the end see if you can design an appropriate transcript of the transaction, and learn where each document comes from and what it should look like, and how it interacts with the other documents. Every transaction presents a new set of problems.Tip 4. Do a title search and learn how to certify title to a piece of property. Whether you hire someone to do a title search or learn to do one yourself, you need to become familiar with the register’s office and searching through the public record. More importantly you have to be able to read and understand the title and be able to identify problems in the title, and be able to find ways to correct any errors that you might see. If there is a problem, you need to learn how to explain the problem to your client, and explain to your client how to fix the problem.Switching gears for a moment, buying a house is different than buying or selling a business, which is different than buying the assets of a business, which is different from buying a farm, which is different from buying an industrial real estate, which is different from acquiring property through condemnation. I could go on and on.A house for example, there is a realtor, a bank (usually), an appraisal, home inspection, a deed, a deed of trust or mortgage, a closing statement, maybe a lead based paint inspection. Buying a business, is driven through whether you are buying the entity, (the stock) or buying the assets, and might mean there are underground tanks, may require an environmental phase I or phase II. If you are buying property from a municipality, you’ll want to know if you need a Resolution from the board, a certificate of public necessity, whether the property needs to be rezoned and tons of other issues.Finally, its extremely difficult to make all the necessary contacts and acquire the necessary skills to be a competent transaction lawyer. I was lucky to come up in a firm that had a solid transaction book of business and became familiar with lawyers who practiced in the area. If I have a question a quick phone call might solve my issue. I was able to see dozens of transactions and see how each transaction was eventually solved to successful closing. Without this background and training I’d probably refuse to do transaction work beyond the most basic. It’s not what you know that bites you, it’s what you don’t know. While it’s possible to commit malpractice in litigation you have a lot of freedom to structure how you handle the lawsuit. Transaction work on the other hand doesn’t necessarily afford you that luxury. Details are important, and if you miss a federal income tax lien because you didn’t check the right book and you’ll find yourself on the receiving end of a law suit from the bank and you’ll pray to god everyday until the matter gets resolved.Good Luck