Settlement statement

You need to understand what a settlement statement is. Here’s what to know.

What is a settlement statement?

A settlement statement is a document given to borrowers at closing that itemizes services and fees charged to the borrower by the lender or broker. It also contains a good faith estimate.

Deeper definition

A settlement statement is also known as a HUD-1 form or a closing statement. Until 2015, when the rules changed, this form was provided twice.

First, within three business days of applying for a mortgage loan, the borrower receives one in the mail with the person’s estimated closing costs.

The second settlement statement is made available to the borrower one day before the loan closes, with the actual cost of closing. These costs include loan origination fees, appraisal fees, closing costs and all other costs associated with obtaining a mortgage.

Settlement statement example

Initially, the borrower receives a copy of a settlement statement three business days after applying for a mortgage. The form is three pages long and contains information including the type of mortgage, the total amount of the amortized payments over the life of the loan and the amount of money the borrower should expect to have available at the time of closing. Here is the three-page breakdown:

Page 1 — This page is a two-column page explaining the sale price of the home, amounts due from the buyer and seller, and cash due at the time of closing from the borrower to the seller.

Page 2 — Important information on this page pertains to the borrower’s loan fees, including broker fees, deposits the lender already has received, fees associated with recording the home title and an explanation of all other settlement costs.

Page  3 — This page shows any discrepancies in anticipated costs by listing the original numbers from the initial estimate as compared to the actual numbers. Borrowers will see additional information such as whether the borrower has a fixed-rate mortgage, how many payments the borrower will have to make, and the interest rate on the loan. Other details about the interest rate will be included, such as the annual percentage rate (APR) on the loan.

If you are considering applying for a mortgage, you can learn more about home loan closing costs before you start by reading Bankrate’s closing costs guide.

 

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