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Comparing the HUD-1 Settlement Statement and the GFE
By Michael Guzman

Before buying any property, it is important to understand what a HUD-1 Settlement Statement and the Good Faith Estimate (GFE) documents. The HUD-1 Settlement Statement is a summary of all the costs and adjustments due for the buyer and the seller in every real estate transactions or for the borrower in case of a refinancing deal.

The HUD-1 Settlement Statement should be furnished, according to the RESPA law, at closing to provide the buyer and the seller the computation of the actual costs that they have to pay. Although it is not required, the document may also include information from the seller’s transaction summary.

Always ask your settlement agent to give you a thorough explanation of all the sections and items on the settlement statement before you enter into any deal.

Also important is to understand what a GFE or Good Faith Estimate is. You must be able to recognize that the line item numbers of the Good Faith Estimate correspond directly with the line item numbers on the HUD-1 Settlement Statement. This was specifically designed by the government to allow you to compare what you were told to what you will pay.

Here are some of the sections you will find in the HUD-1 Settlement Statement:

Section J is the summary of the borrower’s side of the transaction.

o HUD 100-120
o HUD 200-220
o HUD 300

Section K is the summary of the seller’s side of the transaction.

o HUD 400-420
o HUD 500-520
o HUD 600

On the other hand, the GFE is the document you will receive before any real estate transaction. As the name implies, it is just an estimate. The HUD-1 settlement statement, which you’ll receive at the closing, will show you the actual cost for items paid at settlement.

Keep in mind that you have to bring along the Good Faith Estimate to the closing transaction so you can compare the costs on the HUD-1 Settlement Statement. Most buyers forget this important detail and don’t realize the importance of comparing both document for any unexpected changes in cost.

Here is an example when comparing GFE and HUD-1 Settlement Statement entries:

GFE Line Items:

801: Loan origination fee $2,000
902 Mortgage Insurance Premium $1,000
1001: Hazard Insurance Premiums $300
1101: Closing or Escrow Fee $300
1201 Recording Fees $25
1302 Pest inspection $200

HUD-1

Line Items 801: Loan origination fee $2,000
902 Mortgage Insurance Premium $1,000
1001: Hazard Insurance Premiums $300
1101: Closing or Escrow Fee $300
1201 Recording Fees $25
1302 Pest inspection $200

What you’ll want to watch for are unexpected and unexplained fees. Take a look at this next example:

Line Item 801: Loan origination fee $2,000
Line Item 801: Loan origination fee $2,500

On this Good Faith Estimate, line item 801 lists a loan origination fee of $2,000. However the HUD-1 Settlement Statement lists $2,500 – a difference of $500! It is your right as a consumer to ask an explanation why the added $500 from the original estimate. You are never required to accept a loan that is different from what you expected. There should be no surprises at this late date. If the fees are substantially different, don’t sign any documents unless you agree with the new terms.

Michael Guzman provides software solutions to real estate professional and investors. You can find more information on electronic HUD Statements.

Article Source: http://EzineArticles.com/?expert=Michael_Guzman
http://EzineArticles.com/?Comparing-the-HUD-1-Settlement-Statement-and-the-GFE&id=3152973

Understanding HUD-1 is Critical For the Short Sale (Foreclosure) Investor
By Tom Farwell

If you are about to work a short sale or do them on a regular basis, lenders require a offer package that normally includes a purchase contract, a letter of authorization, a hardship letter, a statement of the seller’s financials, a listing agreement (maybe), and a properly completed “preliminary” HUD-1 form.

I used the word preliminary here because in the initial offer, the HUD-1 numbers are not exact (but the form needs to be accurate) and are normally the responsibility of the investor. As the deal moves through the approval process and toward a formal closing, a title company will normally produce a final HUD-1, with exact numbers.

An example of the form can be found on the HUD website.

One of the most important skills for the foreclosure investor is to be able to properly complete the HUD-1 Settlement statement. In a short sale (and “regular” real estate transactions), this form dictates who gets how much money. Period.

The HUD-1 form is under control of the Real Estate Settlement Procedures Act (RESPA). This act reads that the form is to be distributed to all parties one day prior to closing. However, some closings have very short time constraints and the final HUD-1 may be distributed shortly before the closing.

The two-page form is divided into sections, with Seller details on the right and Buyer details on the left. These sections are further divided by row numbers. We’ll focus on the seller’s side of the form, because that is the side that the lenders examine in a short sale.

The top part of the form is straightforward with seller name, buyer name, property address, etc.

Line 401 is the gross offer price.

Lines 504 and 505 represent the net offers to the 1st and 2nd lien holders. These two lines are the most significant in a short sale offer.

Lines 510-519 are used for pro-ration of the current year’s taxes, along with noting past due taxes or HOA liens.

Lines 700-704 are use to note real estate commission charges.

Lines 1100-1113 are used to note title fees, closing processing fees, etc.

Lines 1300-1305 are for additional settlement fees.

Note that the lenders are looking for line 603 to be zero, as this is the cash to seller figure.

Since most title companies will not do numerous prelim HUD-1s on deals that do not close, it is imperative that the foreclosure investor lean how to accurately complete the HUD-1 form. It is the biggest tool used in the negotiation process.

Go to http://www.MissShortSaleExpert.com, the premiere online community for foreclosure real estate investors, for more information. We’ll show you how to run your business AS a business!

Tom Farwell, also known as Mr Short Sale In Colorado, has closed over 100 deals and has taught hundreds of students.

Article Source: http://EzineArticles.com/?expert=Tom_Farwell
http://EzineArticles.com/?Understanding-HUD-1-is-Critical-For-the-Short-Sale-(Foreclosure)-Investor&id=1961181

Breaking Down the HUD-1
By Joshua Marks

The Settlement Statement, often referred to as the “HUD-1“, is a document that contains a detailed breakdown of the closing costs apportioned between the buyer and seller of property. Typically, the closing agent (often a representative from the title company), gathers the pertinent information, completes the Settlement Statement and disperses the required funds once the buyer and seller have certified the accuracy of the statement by signing it. The first page of the Settlement Sheet is broken down into a summary of the borrower’s (buyer) transaction on the left side and a summary of the seller’s transaction on the right. The second page is divided into those costs that are “paid from borrower’s funds at settlement” and those costs that are “paid from seller’s funds at settlement”. If buyer, seller and title agent agree that the statement is true and accurate, all parties sign and date the sheet toward the bottom of page two. The following key sections of the HUD-1 should be thoroughly reviewed in any transaction:

Borrower’s Transaction:

Line 101- Lists the contract price as stated in the Agreement of Sale

Line 103- Total settlement charges to the borrower; this is obtained from adding up all of the costs on the second page and is also referenced in Line 1400.

Line 120- This is the total amount due from the borrower inclusive of the contract price, costs listed on page two of the sheet and adjustments for taxes and other items paid by seller in advance.

Line 220- States the total amount paid by or for borrower including deposit monies, principal loan(s) and Sellers Assist.

Line 303- The figure here is the total amount of funds (in cash or certified check) that borrower needs to bring to settlement in order to close.

Lines 801-811- All of the costs associated with the loan such as origination fees, appraisal fee, credit report fee, processing fee, administration fee and flood certification fee are listed. If any of the fees are “lender retained”, which is indicated by the abbreviation LR, then this amount was subtracted from the amount of funds actually wired by the lender to the title company.

Lines 901-905- Any amounts that are required by the lender to be paid in advance, such as daily interest, is set forth here. For example, if Buyer settles on May 20, 2008, the lender will likely require that the Buyer pay in advance daily interest on the loan through June 1, 2008.

Lines 1001-1009- All reserves that the lender requires to be set aside in an escrow account such as hazard insurance, county taxes, and school taxes are set forth.

Lines 1101-1113- Includes all charges associated with the Buyer’s title insurance such as the insurance premium, search fee, examination fee, endorsements, closing service letter and overnight wire fee.

Lines 1201-1203- Details the recording fees charged by the county to record the deed and mortgage and sets forth the proportionate share of the real estate transfer taxes for Buyer and Seller.

Seller’s Transaction:

Lines 406-412- Adjustments are made for items, such as taxes, that Seller has already paid in advance of settlement. For example, if settlement takes place on June 1, 2008 and Seller has already paid county taxes through the end of 2008, then Seller must be reimbursed from the date of closing (June 1, 2008) through the end of the year.

Lines 501-509- Itemizes all reductions in the amount that Seller would otherwise walk away with from the settlement table, such as existing mortgages that must be paid off and Seller’s settlement charges (as listed on Line 1400 on page 2).

Line 603- This is the total amount of funds that Seller nets on the transaction, which is typically dispersed by way of a check from the title agent.

Lines 701-702- Sets forth the total commission that Seller must pay to the real estate agents involve in the transaction. This is typically the Seller’s single largest cost at settlement.

Lines 1201-1203- The Seller is also responsible for a share of the real estate transfer taxes. In many jurisdictions, the transfer taxes are based on a percentage of the contract price and are split equally between Buyer and Seller.

It is always good practice to request that the title company (or closing agent) furnish a preliminary HUD-1 a day or two before closing so that there are no surprise costs at the last minute. Make sure to review the preliminary HUD-1 with your attorney or real estate agent and bring it with you to settlement. You should compare this draft with the final HUD-1 to insure accuracy of all costs to Buyer and Seller.

Joshua M. Marks, Esq.
Marks & Rosenzweig, LLC
http://www.lawmr.com
josh@lawmr.com

Article Source: http://EzineArticles.com/?expert=Joshua_Marks
http://EzineArticles.com/?Breaking-Down-the-HUD-1&id=1644096

Understanding HUD-1 is Critical For the Short Sale (Foreclosure) Investor
By Tom Farwell

If you are about to work a short sale or do them on a regular basis, lenders require a offer package that normally includes a purchase contract, a letter of authorization, a hardship letter, a statement of the seller’s financials, a listing agreement (maybe), and a properly completed “preliminary” HUD-1 form.

I used the word preliminary here because in the initial offer, the HUD-1 numbers are not exact (but the form needs to be accurate) and are normally the responsibility of the investor. As the deal moves through the approval process and toward a formal closing, a title company will normally produce a final HUD-1, with exact numbers.

An example of the form can be found on the HUD website.

One of the most important skills for the foreclosure investor is to be able to properly complete the HUD-1 Settlement statement. In a short sale (and “regular” real estate transactions), this form dictates who gets how much money. Period.

The HUD-1 form is under control of the Real Estate Settlement Procedures Act (RESPA). This act reads that the form is to be distributed to all parties one day prior to closing. However, some closings have very short time constraints and the final HUD-1 may be distributed shortly before the closing.

The two-page form is divided into sections, with Seller details on the right and Buyer details on the left. These sections are further divided by row numbers. We’ll focus on the seller’s side of the form, because that is the side that the lenders examine in a short sale.

The top part of the form is straightforward with seller name, buyer name, property address, etc.

Line 401 is the gross offer price.

Lines 504 and 505 represent the net offers to the 1st and 2nd lien holders. These two lines are the most significant in a short sale offer.

Lines 510-519 are used for pro-ration of the current year’s taxes, along with noting past due taxes or HOA liens.

Lines 700-704 are use to note real estate commission charges.

Lines 1100-1113 are used to note title fees, closing processing fees, etc.

Lines 1300-1305 are for additional settlement fees.

Note that the lenders are looking for line 603 to be zero, as this is the cash to seller figure.

Since most title companies will not do numerous prelim HUD-1s on deals that do not close, it is imperative that the foreclosure investor lean how to accurately complete the HUD-1 form. It is the biggest tool used in the negotiation process.

Go to http://www.MissShortSaleExpert.com, the premiere online community for foreclosure real estate investors, for more information. We’ll show you how to run your business AS a business!

Tom Farwell, also known as Mr Short Sale In Colorado, has closed over 100 deals and has taught hundreds of students.

Article Source: http://EzineArticles.com/?expert=Tom_Farwell
http://EzineArticles.com/?Understanding-HUD-1-is-Critical-For-the-Short-Sale-(Foreclosure)-Investor&id=1961181

Hidden Costs on Your Closing Statement – 4 Ways to Find Them
By Arlen Robinson

Baltimore investment property encompasses a series of documents, one of them being the closing statement. This is one of the most important documents. It contains a list of every disclosure provided by the property owners. It also contains the mortgage broker fees as well as all other costs related to closing on a home.

However, there are some hidden costs on your closing statement that many of you might not notice. It’s true that a closing statement is supposed to reveal all the costs; but there are times when certain costs remain hidden. These may be costs for points, courier charges, processing fees, overnight delivery costs, notary fees, and documentation surcharges. You must dig in and find the hidden costs on your closing statement before you finalize your Baltimore investment property deals.

You have the right to question hidden costs. But, how do you find them on your closing statement? There are 4 ways to do this.

4 Ways To Find Hidden Costs

* Read every word on your document carefully. Before the date of closing, take your statement home and read it with a calm and concentrated mind. Let your family members read it too. Highlight things you don’t understand. Mark fees that sound superfluous (although they might not be).

* Arrange for a talk with your real estate agent. He or she is the best person to discuss about hidden costs in Baltimore investment property. Rather than letting your agent dictate, examine each point on your own that you marked while reading the document. Do this in front of the agent and ask things you don’t understand one by one. This way, you’ll be able to understand the complete closing statement.

* Arrange for a talk with your lawyer. A real estate agent might not be able to explain every hidden cost on your statement. This is probably because your agent has an eye on the commission that he or she is expected to get on your home. Hence, they will shower you with reassurances, which might not help at this time. Therefore, it’s necessary to contact your lawyer and go through the closing statement once again. Your lawyer will tell you the costs that are legitimate and the ones you are required to fight about.

* Bring out your negotiation skills. In case you’re dealing with a title company or motivated seller or mortgage provider for Baltimore investment property, you have better chances of negotiation. If you are sure that you’re being charged superfluously, you must not keep silent.

Don’t let anyone exploit you when you go for Baltimore investment property. You are under no obligation to pay more for any service. Learn to dig out hidden costs on your closing statement and save bundles of dollars.

Arlen Robinson is a client education manager for MDJustListed.com. At this website you can find homes for sale Howard County MD and surrounding counties in Maryland and the District of Columbia.

Article Source: http://EzineArticles.com/?expert=Arlen_Robinson
http://EzineArticles.com/?Hidden-Costs-on-Your-Closing-Statement—4-Ways-to-Find-Them&id=2149227