Time To Refinance – For Real This Time
For the past few months we’ve been looking into refinancing our mortgage. Our interest rate on our current mortgage is at 6.5%. Since mortgage rates have been hovering around the low to mid 5 percent range since the beginning of the year we knew we wanted to refinance – before the rates disappeared again.
We were about to refinance our loan through the Making Home Affordable Refinance Program in February or March, but my wife ended up in the hospital for surgery. We had to put it off. Unfortunately because we delayed our refinance I think we missed our chance at a 5% (or lower) interest rate.
We’ve now paid off all of our hospital bills from earlier this year, and last week we restarted the process of refinancing our home. Thankfully we’re still reducing our interest rate through this refinance by over a full point. The costs of the refinance will be repaid in just over a year, and after that it’s all gain!
Now that we’ve applied for a loan, and locked in our rate, we’ve received a good faith estimate (GFE). A GFE must be provided by a mortgage lender or broker in the United States to a customer, as required by the Real Estate Settlement Procedures Act (RESPA). The estimate must include an itemized list of fees and costs associated with your loan and must be provided within three business days of applying for a loan. (Hold on to this GFE because you’ll be using it later to compare the actual final fees before your closing)
One of the most important documents that we’ll be looking at before finalizing everything at the closing is the HUD-1 Settlement Statement. Today I thought I’d take a look at this document in depth.
The HUD-1 Settlement Statement – What Is It?
The HUD-1 Settlement Statement is the form that the settlement agent will use at your closing to itemize all charges that you as a buyer can expect to pay when buying or refinancing your house. It will give everyone involved in the transaction (buyers, sellers, agents, brokers) a complete listing of their incoming and outgoing funds.
You should get a copy of your HUD-1 at least one day prior to the settlement as required by the Real Estate Settlement Procedures Act (RESPA). The fees and charges that the HUD-1 shows should match, or at least come close to the charges that were shown on the Good Faith Estimate (GFE) that you received when first investigating the loan or refinance. If they don’t, something might not be right.
When you get that HUD-1 statement, make sure that you look it over closely, compare it to your GFE, and find any errors that may be present. Easier to fix them now rather than later.
The HUD-1 has several sections that you’ll need to look over.
Sections A through I (General Information)
The HUD-1 starts with sections A through I which have basic information about your loan, the buyer, the seller, borrower and the home that you’re buying. Basic stuff.
Section J (Summary of Borrower’s Transaction)
Section J will have the gross totals of your costs, credits and the net amount that you will owe for the purchase of your home. The totals are broken down by category:
- 100. Gross Amount Due From Borrower: This is the amount you’ll owe for the house and will include the house’s purchase prices, fees and settlement charges, and any other miscellaneous extras you may have bought from the seller – or any taxes that they have pre-paid. (Line 120 is total.)
- 200. Amounts Paid By Or In Behalf of Borrower: This section will detail amounts you have paid such as your deposit, or financed, like your new mortgage. It will also include any money that the seller owes to you such as unpaid taxes, utility costs or any repair allowances that have been made during negotiation. (Line 220 is total.)
- 300. Cash at Settlement From/To Borrower: This section will show the actual amount of money that you must bring to the settlement. It will be the gross amount from line 120 minus the credits from line 220. (Line 303 is total.)
Section K (Summary of Seller’s Transaction)
This section will have a listing of the gross amount due to the seller, along with any necessary adjustments for items talked about above – like if the seller has unpaid or prepaid taxes.
Section L (Settlement Charges)
Section L, on the second page of the form, shows all the specific costs for financing and processing of the transaction. It includes:
- 700. Total Sales/Broker’s Commission based on price: The commission paid to the real estate broker.
- 800. Items Payable In Connection With Loan: Things included in this section will include things like the loan origination fee, any discount points you have paid to reduce the mortgage rate, the appraisal fee and credit report fee, the application fee for mortgage insurance (thankfully we don’t have PMI!), and the assumption fee, if you’ve assumed an existing mortgage. Fees you’ve paid up front are marked P.O.C. (paid outside of closing) and will not be included in the total on Line 1400.
- 900. Items Required By Lender To Be Paid In Advance: This section will include items that need to be paid in advance including the interest on the loan for the first monthly payment, mortgage insurance, hazard and homeowner’s insurance. These amounts will often be enough to cover the first year.
- 1000. Reserves Deposited With Lender: These escrow items will be held by the lender, and in some cases required to be held. Items included here would be things like property taxes and other annual assessments. In some cases you’ll be asked to pay a monthly escrow amount for insurance or homeowner’s association fees here as well. There is a maximum that can be charged.
- 1100. Title Charges: The costs of changing ownership of the property, such as the settlement or closing fee, title examination fee and attorney’s fee. If the fee is payable to a third party, such as the notary or attorney, it is indicated. If one agent performs more than one service, the fees may be lumped together on one line.
- 1200. Government Recording and Transfer Charges: Items like city, county and state taxes or stamps needed to transfer ownership are listed here. The buyer often pays the deed and mortgage recording fees to change the owner of record with the county/state.
- 1300. Additional Settlement Charges: Other items such as surveys, inspections for such things as pests and lead-based paint, and home warranties. These are not always included, depending on where you’re buying, and the circumstances.
- 1400. Total Settlement Charges: The sum total of all of the fees listed in the HUD-1. The amount listed in the buyer’s (or borrower’s) column should be identical to the amount listed as “settlement charges to borrower” on page one, line 103, while the amount in the seller’s column should be the same as the “settlement charges to seller” on page one, line 502.
It’s important to read through the HUD-1 form carefully and determine that it’s complete and accurate. You and the settlement agent will then both sign it to authorize payment of the funds. Once that’s done, the home is yours (or your refinance is complete).
Have you ever been in a situation where you discovered an error in your HUD-1? Do you have other questions or things you’re confused about with the HUD-1 Settlement Statement? Let us know about it in the comments!
I will most certainly be printing this article off & using it to study over the forms before I go to my local credit union to attempt my refinance.
Thank you for taking the time to share your experience with us… it will save me a lot of time, no doubt about it!
Matt Jabs´s last blog ..Debt Reduction with The Debt Snowflake Method
Thank you so much for posting this information! We are in the middle of escrow, buying our first home (we are in our 50s!) and it is all confusing to me. I will definately print out this article so we can be prepared to study the Hud-1 Settlement in comparison to the GFE we received. As far as I know, our Lender has not locked in our rate yet…I will check into that today. Thanks again (for all of the sound, Biblical advise that you give)
You ask… Do you have other questions or things you’re confused about with the HUD-1 Settlement Statement?
Where should consumer debt payoff on a re-fi be listed on the HUD-1? On line 103 – Settlement charges?
Is it usual for the title company to modify the HUD-1 as compared to the GFE? We were recently involved in a refinance which involved taking some cash out to pay down some debt. The paperwork was signed, notarized and completed (or so I thought) on a Thursday evening; but on the following Thursday when the HUD-1 was emailed to me, the escrow officer said a mistake was discovered and the cash out amount was reduced by thousands of dollars. The loan officer reviewed the details and characterized it as an honest mistake. This mistake has cost me thousands, do I have any recourse?
The same exact thing just happened to me and it’s too late to cancel the loan. What recourse do I have?
Me and husband are first time homebuyers,
just got the settlement papers. i am so confused, called the mortgage waiting to hear back. line 303 is what we need to bring to settlement, does that include the down payment?, does that include the earnest money or do you deduct it fromt that? beacuse in the form it adds in stuff i already paid for like homeowners and appraisal fee, do they deduct that? hope to hear some answers soon from somone.
We closed on our home 3 months ago. On our hud1 it says 521.00 to be paid to home insurance comapny by seller.
Two weeks ago we find out this was not done.
There were issues, with original closing and the date was extended. Because of this the homeowners insurance policy number was changed.
We closed and two weeks after received a email from title company, saying they thought we weren’t insured… the homeowners insurance company returned the check sent by title company. After many phone calls we discovered title co had sent it with old policy number. We called everyone invovled and believed issue to be cleared up.
A week later another email was sent by title company stating they had sent a email a week ago and wanted to know what was up, the person on email wasn’t the person we normally dealt with and husband sent email saying this should be taken care of and we were insured.
Title company then without telling us sent 521.00 back to the seller.
Now we almost lost insurance, we paid a minimum payment to keep it active. But title company says they did nothing wrong and by law had to return money to seller, they called seller and asked for money seller refused so title company says its not their fault it is the insurance companies fault, they refuse to help us or refund money.
Am I wrong don’t they have to follow hud1? Despite anything else aren’t they in charge of making sure hud1 and escrow are paid properly.
I don’t know what to do please help!
For all of you that have problems with your HUDS I have just 1 question…Do any of you live in Florida? The reason I ask is because you have all hit on the SAME PROBLEMS I HAVE ! My realtor followed the VA requirements to the “T” we even put an extra $6000 into the contract to cover anything that the VA required done.
That said, we never got the HUD until we walked into the closing, were forced to sign or loose over $9k in repairs that the seller had refused to make (we had agreed to only replace the tile in 1 bathroom shower and clean the pool). We were told that we would be getting almost all of the $6k back -after all the things you had to pay for and repair were VA required. BUT when we saw the HUD they had even used our deposit to pay the back taxes on the property at almost $4000! (which we later found out were only $1648.00) and even claimed a water bill of $590 which was only $78 AND NEVER PAID.
Oh did I mention the failure to disclouse that the 2 lane road in front of our house is being widened to 6 lanes and our driveway is where the stop light goes! And we loose access to our house totally. Buy the way this was no mom and pop company the realty company is a Prudental comapny and the selling bank is AHMS and Deutche Bank National Trust Co.
Needless to say now $17,000 in costs to date, plus $5,000 in attorney fees, not to mention we will not be able to claim the $8,000 first time buyers credit now (if we do we will have to pay it back and when they replace the house we can’t because the IRS says we will have already on record owned a new home – go figure) and we are still living out of boxes in our new FIRST HOME. We moved in on September 28, 2009 today is December 28, 2009, Well we had a plastic tree for Christams and each other at least.
I recently closed on my house, signed my contract and thought all was fine. It was discovered that instead of a variable rate of 4% on the contract, the company mistakenly had the rate as fixed for 15 years. They want me to resign a new contract that makes the rate variable, eventhough the contract they signed has the rate as fixed. Am I responsible for this error, or should I tell them to go pound salt? Thanks. Tom
I know what I’d do. And it wouldn’t be signing anything. If you’d have made a mistake and signed variable when you thought fixed, they sure wouldn’t be letting you re-sign the contract!
I bought a HUD home in March, and I did not receive a survey of my property lines, how can I obtain a survey of my property? I had hired an attorney, who says they have to give me the info, but he is not doing the leg work, and the financial title company that sold me the home is not returning my calls. what can I do> Olease from 1 christian to anothe please help me. ( Praise God) Thanks you, and have a Blessed Day
Rene
My mothers estate was sold by the executrix of the estate, which our mother had deferred property taxes for over 15 years. These deferred property taxes had to be paid out of the money received from the sale of the estate property. On the back of the form “H.U.D. SETTLEMENT FORM” it showed the amount paid (approx. $30,000.00) from the sale of the estate and also showed the dates being covered from this payment. It showed back tax years paid were (2007 thru 2010) but should read as the years (1995 thru 2010). what is really going on here ? The executrix is an irrate sibling and is suspect of fraud already by the other siblings in the family… She, our sister the executrix, has been a monster of sorts to all concerned including destroying property of the estate among other atrocities done to other members of the family over the past 15 months following the passing of our mother. Could this be fraud in the misrepresenting correctly on the contract in question on her part ? It would sure make since if it was cause all signs point to this.
I received paperwork that our escrow closed along with the HIS settlement statement. Enclosed was a check for the amount on line 303 made out to my husband and I. Everything has been finalized and I guess I don’t understand why we get the check?? This was a refinance but is this our money now?
I received paperwork that our escrow closed along with the HIS settlement statement. Enclosed was a check for the amount on line 303 made out to my husband and I. Everything has been finalized and I guess I don’t understand why we get the check?? This was a refinance but is this our money now ours? I know I probably need to call the title company but I kind of feel stupid asking.
we can’t find the orginial Hud settlement paper so we can’t do a streamline refinance to get a lower rate. Title company and mortgage company out of business, current mortgage co. says they don’t have it. Is there anything we can do
Hi I have found this very helpful as I feel we have a disaster on out hands.. our wf broker was horrible and out for himself. He signed us up for our 1st home and didn’t even add me onto anything as he was suppose to at least the deed. But basically after loan origination we didnt see our agent until closing.. wouldnt meet with us. So we still dont know where our monwy is going and where it shows itemized each prepaid and the fees seem rediculos. And with my husband great credit score we gained points and that’s with fha -hud loan . We also had sellers pay closing we said all of closing not sure why he put up to 3% due from seller. We had also had a credit for a year and a half for taxes, we had to prepay a year’s worth of taxes, insurance, 500 earnest dp, interest, escrow origination with many other issues.. How to fix this if we had a dirty the if agent .. hud 1 different than tittle co and wells f.. no one seems to know how to help …. any expertise would be great
When are debts paid on a Hud 1 Settlement statement . Thanks .