When you buy your first home, you and your spouse may be overwhelmed by the amount of forms and documents involved. Even at the meeting to sign the final paperwork and receive ownership of your home, you are required to muddle through what seems like reams of paper that convey the same message. You must pay attention to what you are signing, though. Some of the documents, like the bank note, are of vital importance to your purchase and monthly payments. Another form that you need to review closely is the HUD-1 form, or settlement statement. In it, you will find a snapshot of your entire transaction and the amount of money you must pay before you receive the keys to your new home.
The first page of a settlement statement contains address information for the buyer, seller and property. A summary of the document for borrower and seller is contained on this page. The buyer's column details the sale price, deposit and amount of the new loan. Pay close attention to the lines in bold print at the bottom. The buyer is responsible for paying the amount on the "Cash from Borrower" line. The seller's summary describes amounts credited to you, such as pro-rated property taxes owed by the owner for the time before the sale is finalized.
Broker and Loan Fees
The second page of the settlement statement contains the payments to the real estate agents, specifying how much the buyer and seller pay. This item is usually deducted from the seller's proceeds. In addition, you will find any costs charged to you for obtaining the mortgage, such as the appraisal and loan points. Details of the loan, such as the term, future interest rate changes or prepayment penalty, are specified near the end of the statement on the third page.
The mortgage company may require you to pre-pay for items, such as hazard insurance, property taxes and interest on your loan. The amounts will be held in an escrow account associated with your mortgage and paid when they become due. These reserve amounts are specified on your settlement statement and usually recur each month throughout the life of the loan. The total cash needed from you at closing may seem considerably more than you calculated because of the pre-paid requirements.
Other charges may appear on your settlement statement, such as title fees, recording costs, and additional city and county taxes. Each item documented on the HUD-1 form reflects part of the money due to complete the transaction. Ask the escrow agent to give you an estimated settlement statement a few days before your closing, when you will pay your down payment and other costs. If you have a question about any of the charges, ask your agent before your final meeting.
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