Hud-1 Settlement Statement Instructions: Fill & Download for Free

Disclaimer: I am a not a licensed real estate professional - just a buyer and seller of residential real estate in various states including California.No. Yet it doesn't make much sense to work without a real estate professional on the purchaser side as the commissions are paid by the seller. From a seller's point of view in California and using a traditional real estate professional, you should set aside 7.2% of the purchase price to cover closing costs, which will be reflected on the HUD-1 Settlement Sheet (see below).Sure, it's 7.2% (includes 3% listing agent and 3% buyer's agent commissions) and that can be a lot of money, but that can seem like a bargain if you screw up the transaction by trying to save money.Can you hope to eliminate or reduce the commissions paid to the listing agent and the buyer's agent? Yes, you could, but you would either need to include an online service like Redfin or ZipRealty, where you get a rebate or use an attorney versed in residential real estate.Real Estate Closing RulesRegulations for real estate escrow determine the procedure by which escrow officers and other professionals handle the transfer of real property. A consumer's rights are protected under these rules to best protect the public from fraud. These guidelines are maintained and followed by escrow professionals to make each closing fair, accurate and ethical.RESPAThe Real Estate Settlement Procedures Act, or RESPA, ensures that consumers receive accurate information about mortgage settlement charges. RESPA also inhibits abusive lender practices. The act requires lending institutions to give consumers a standardized Good Faith Estimate that details loan settlement fees, origination fees and interest rates. RESPA also outlaws kickbacks to service providers that can increase the cost of settlement charges.HUD-1 Settlement SheetEscrow service providers, commonly referred to as closing agents, prepare the HUD-1 Settlement Sheet at the time of closing. This statement details the buyer's and seller's costs and credits associated with a real estate transaction. It provides a detailed breakdown of each item. RESPA requires that the HUD form be used in all real estate closings, whether a purchase or refinance. The form must be given to the borrower at least one business day before the settlement date.Escrow InstructionsEscrow agents prepare closing instructions, which must adhere to RESPA guidelines. Closing instructions detail every step of a transaction's closing process, such as documents to be signed, fees to be charged and funds to be collected. All closing instructions must be satisfied for the deed transfer to occur. Any changes to escrow instructions must be mutually agreed upon by the buyer and the seller.Neutral Third PartyIn a real estate transaction, an escrow officer must remain neutral and cannot be involved in client disputes. Clients, with the help of their real estate agents or attorneys, must resolve any disagreements on their own. Additionally, escrow officers cannot give legal advice.

A double closing is the simultaneous purchase and sale of a real estate property involving three parties: the original seller, an investor (middleman), and the final buyer.The underlying reasons for having a double closing vary. The most pressing and usual reason is to allow the middleman to use the purchasers funds to acquire the property from the original seller. Another common reason for a double closing is to conceal the identity of the purchaser or seller.Typically, a real estate investor first enters into a contract to purchase a property and then subsequently (before closing the purchase) enters into a contract to sell the property (hopefully for a higher price). The investor then utilizes a double closing to close both transactions at approximately the same time.The mechanics of a double closing vary, depending on who the buyer and seller are, who is providing the financing, and who is conducting the closing. In the simplest form of double closing, the purchaser would pay the purchase monies to the middleman and they would complete a settlement statement (HUD-1) for their transaction. The purchaser would have to wait while the middleman uses most of the purchase monies to purchase the property from the seller. The seller and middleman would also complete a separate settlement statement for their transaction. The middleman would then instruct the seller to deed the property directly to the purchaser.To keep the purchaser and seller separate, the closing may be conducted in two different rooms or at two different times or locations. Success is more likely if the closing agent is friendly and accommodating.To simplify the transaction, the middleman may make one settlement statement directly between the purchaser and seller and take his profit as a line item on the settlement statement. This line item is usually on the purchaser's side of the statement as an assignment fee. This may create a problem for the middleman, as assignment fees may be taxed at a different rate than short-term capital gains.From a legal standpoint, most sale contracts stipulate that the seller may pay encumbrances out of the proceeds of the sale. The fact that the original seller still owns the property is definitely an encumbrance. Also, contracts may be assignable, thus allowing the middleman to have the right to assign his purchase contract to the purchaser for a fee.

Wow. A lot. But let's make it simple:The best entity for a mortgage is a Mortgage Broker. This person:• Is known through advertising and client referrals;• Works for an independent brokerage and works to the benefit of the Buyer only;• Has access to a very large number of Mortgage products and is the “go between” between the Borrower and all the Lenders;• Has numerous options if a Mortgage application is Denied - if this occurs the Mortgage Broker can move the loan to multiple sources until the loan is approved;• Does both Conventional and Government loans as well as specialty Mortgage loans, like loans for people Self-Employed for only a short time or people who need Jumbo loans;• Brokers loans to a large number of lending sources.The other entity involved in Purchasing a home is the Real Estate Agent. If a Real Estate Agent is used (which is not required in any state), that Buyer’s Agent will work for the Buyer and will help him/her find a home to purchase.The Buyer’s Agent should be just that - the Agent for the Buyer. Avoid DualAgency, which is a Real Estate Agent acting as an Intermediary, representing both the Buyer and the Seller. Nice in theory but totally unrealistic and unethical in practice.The Buyer’s Agent should do the following for the Buyer:• Visit with the Buyer to understand the Buyer’s needs and preferences in a new home;• Search through databases (like MLS), newspapers and websites for properties the Buyer may like;• Preview properties to make certain that they meet the Buyer’s needs and preferences;• Accompany the Buyer to view numerous properties until the Buyer finds one that interests them;• Provide school district, neighborhood and other information about the house that interests the Buyer;• Assist the Buyer in preparing an Offer;• Work with the mortgage broker on the financial items contained in the Offer (don't use the Real Estate Agent's pet mortgage broker - instead use a company like The Mortgage Professor or HomeStart Landing Page to find a good mortgage broker);• Present the Offer and the Prequalification letter to the Seller or Seller’s Agent;• Assist in negotiations to move the Offer to an executed Contract;• In states that use Surveys, obtain the Seller’s existing Survey for the loan originator;• Meet the Home Inspector at the property;• Advise the Buyer of contractual dates (like the end of the Inspection period) throughout the Purchase process;• Meet the Appraiser at the property;• Review the Survey (if applicable) to make sure there are no boundary, Building Line, Setback, Easement, Ingress or Egress issues;• Review the Title Commitment for any Mortgage Lien, Tax Lien, Mechanics Lien or other Title issues;• Keep in contact with the mortgage broker to be aware of when a Closing is likely;• Do a final Walk Through with the Buyer;• Attend the Closing;• Secure the property keys for the Buyer; and• Provide referrals to a locksmith, handymen, etc.There is no requirement in any state for a Buyer to use a Real Estate Agent. If the Buyer wishes to do the agent's work, anyone can assist you in the negotiation of a contract for a house you found yourself, as long as they don't receive compensation for doing so;Now that you know who the players are, it’s important that you understand:• What a Mortgage is;• A few basic Mortgage terms;• What all the costs are;• What kind of funds can be used in the Purchase;• What is involved in the Purchase process;• What is involved in the Mortgage process; and• How to prepare in order to obtain a Mortgage loan.A Mortgage is a Lien that encumbers the property. A Mortgage Lien is like an IOU, attached to the Title of the property making the property the Collateral for the amount of the loan that was extended to the Buyer.Title basically proves who owns the property, shows the current Liens against the property, declares any oddities about the property to which the Title Insurance Company may take exception and sometimes shows a record of all the transactions that have taken place against the property.There are both First Mortgages and Second Mortgages. These different Mortgages are attached to the Title of a property in an order; the First Mortgage being the most superior and subordinate Mortgagesbeing inferior. The vast majority of Mortgages are First Mortgages, however, it can sometimes be advantageous for a Buyer to do a Combo Loan that gives him/her a First Mortgage followed by a Second Mortgage in the same transaction.Mortgages are either Amortized or not. Amortized loans are fixed Rate Mortgages, Adjustable Rate Mortgages and Balloons. Non-Amortized loans are Interest-Only loans where the payments do not pay the loan off, but only the Interest that accrues monthly.Fixed Rate Mortgages are generally used when Interest Rates are low. Adjustable Rate Mortgages are generally used when Interest Rates are high or when the Buyer does not expect to keep the property for very long. Balloons are also used when Interest Rates are high or when the Buyer does not expect to keep the property for very long. Interest-Only loans are used when the Buyer demonstrates a need to keep the payments as low as possible.When a Buyer Purchases a home, the Mortgage Lender will loan a percentage of the Purchase Price.This loan percentage can be as high as 97% of the Purchase Price. Any left over percentage is the Down Payment. The Buyer will pay the following items to Purchase a home:• The Earnest Money/Deposit on the Real Estate Contract;• The Option Fee (or Inspection period fee) on the Real Estate Contract (in states that use Option Fees);• The Inspection fee(s) of the actual Home Inspection at the time the Inspection is done;• The Termite examination and any appropriate treatment;• The Down Payment on the property;• The Closing Costs on the loan; and• The Prepaids on the loan.There are a large number of people or entities involved in a Mortgage loan. Closing Costs are the charges and fees associated with these parties. Closing Costs include Origination charges, Lender charges, the Appraisal fee, the Credit Report fee, Title/Escrow Company fees, etc. Closing Costs areitemized on a Good Faith Estimate and a Fee Worksheet provided by the loan originator and then again, at Closing (on a HUD-1 Settlement Statement), by the Title/Escrow Company or Closing Attorney who is Closing the loan. Sometimes, the Buyer’s Agent and the loan originator will secure money from the Seller to pay some or all of the Closing Costs for the Buyer. These monies are called Seller Concessions or Contributions. Prepaid Items (Prepaids) are not Closing Costs. Prepaids are loan Interest, the Homeowner’s Insurance first year premium and Escrow Reserves.Not all funds may be used for the Down Payment, Closing Costs and Prepaids. Funds paying for these items must be Seasoned (in the Buyer’s account) for at least 60 days, must be Sourced (from anacceptable source like a paycheck or a tax refund) or must be a Gift (donated funds from an approved source) on a loan that allows Gifts.The Purchasing process is as follows:• Gather your financial documents to prepare for your Mortgage financing;• Choose a Mortgage Broker;• Obtain a Prequalification letter;• Get started on the Mortgage loan. Arranging the Mortgage financing before you look for property may seem;backward, but it allows the prospective Buyer to know how much he/she can qualify for, and whether or not he/she is comfortable with the payments, etc. before looking for a property;• Find a Buyer’s Agent and an attorney (if an attorney is required in your state). Keep in mind that there is no requirement to have a Buyer’s Agent;• Enter into a Contract including delivering the Earnest Money/Deposit check and Option Fee check (if applicable) to the appropriate party or parties (Real Estate Agency, Title/Escrow Company or Closing Attorney’s law firm);• Perform Home Inspection, including Termite (if desired, required on an FHA loan);• Perform other Inspections (Septic or Well, if applicable, or Foundation if Home Inspector has concerns);• Order or obtain Survey from Seller (in states that use Surveys);• Perform Appraisal;• Arrange Homeowner’s Insurance coverage for the home;• Complete Mortgage financing, including deciding if using a Power Of Attorney;• Obtain Closing check. This check must be a cashier’s check so that the funds are immediately negotiable (can be immediately cashed); however, a wire from the Borrower’s bank account to the Title/Escrow Company’s bank account (or Closing Attorney’s trust account) will also work. If a Borrower is wiring funds to the Title/Escrow Company, the Borrower first needs to obtain the Title/Escrow Company’s wiring instructions so that the funds are applied to the Borrower’s transaction. The same is true for wiring funds to a Closing Attorney’s law firm;• Attend Closing. Usually the only items the Buyer should bring to Closing are a photo identification, the Closing check and a checkbook (if the Closing check was not for the exact amount due); however, the Mortgage Lendermay ask the Buyer to bring originals of Letters of Explanation or other items to Closing.The Mortgage process is as follows:• Mortgage Interview;• Loan Application;• Financial document gathering and delivery;• Processing;• Property Appraisal;• Underwriting;• Conditional Approval;• Gathering Conditions;• Document Preparation; and• Closing.It is always best if the Buyer prepares for obtaining a Purchase Mortgage loan. Preparation for obtaining a Purchase Mortgage includes:• Finding Income Tax Return copies for last two years;• Finding W2 forms for last three calendar years;• Finding business (C-Corporations, S-Corporations, Limited Liability Companies, Partnerships) Income Tax copies (if Self-Employed) for last two years;• Finding K-1 forms for last three calendar years (if Self-Employed);• Gathering pay documents (one month’s worth of paycheck stubs, a Social Security, Pension, Annuity Award Letters, adoption stipend stubs and/or county printout of child support payments received);• Gathering asset documents (two months most current bank statements for all checking, savings, and money market accounts, last two statements received for all IRAs, 401Ks, Stock accounts, and Annuities, Settlement Statements from recent property sales) Note that state, county and federal retirement accounts for current employees do not count as assets;• Gathering situational documents (Divorce Decree, Bankruptcy discharge letter and list of creditors, leases for Rental Properties, Tax Appraisal notices for Rental Properties, Homeowner’s Insurance Declarations Pages forRental Properties, proof of payment for Judgments, Tax Liens or collections);• Obtaining a statement of Whole Life Cash Value (if applicable);• Finding the Survey (if Refinancing and in a state that uses surveys);• Finding the Homeowner’s Insurance Declarations Page;• Writing down the names, addresses and telephone numbers of all landlords for the past two years; and• Writing down the name, address and telephone number of all Human Resources departments for all jobs.