Understanding the HUD-1 Settlement Statement

Line by line description

Section 400, Gross Amount Due to Seller
The amounts in this section are added to the seller's funds.

Line 401 states the gross sales price of the property.

Entries for personal property (such items as draperies, washer, dryer, outdoor furniture and decorative items that the seller may be selling to the buyer) are listed on 402.

Lines 404 and 405 are for other amounts owed by the borrower or previously paid by the seller, such as:

• If the borrower is assuming the seller's loan, he/she must reimburse the seller for the balance in the seller's escrow account.

• The buyer may owe the seller a portion of uncollected rents.

Lines 406 through 412 are for items which the Seller has paid in advance. For instance, the buyer may need to reimburse the seller for a prorated portion of county taxes if the seller paid an annual bill but will not own the property during that entire year.

Line 420 is the gross amount due to the seller. It is the total of Lines 401 through 412.

Section 500, Reductions in Amount Due to Seller
The amounts in this section are subtracted from the seller's funds.

Line 501 is used when the seller's real estate broker or another party holds the borrower's earnest money deposit, and will pay it directly to the seller.

Line 502 contains the figure from Line 1400, the seller's total charges as computed in Section L.

Line 503 is used if the borrower is assuming or taking title subject to existing liens which are deducted from the sales price.

Lines 504 and 505 are for any first and/or second loans which will be paid-off as part of settlement (including accrued interest).

Lines 506 through 509 are shown as blank lines for miscellaneous entries.

Line 506 is used to record deposits paid by the borrower to the seller or another party who is not the settlement agent. This is slightly different than the entry in 501. In this case the party holding the funds transfers it to the settlement agent to be disbursed at closing.

These lines may also be used to list additional liens which much be paid at settlement to clear title to the property.

Lines 510 through 519 are for bills which the seller has not yet paid, but owes all or a portion of. Taxes and assessments are listed, but the area might also include rent collected in advance by the seller for a period extending beyond the settlement date.

Line 520 is the total for all items in Section 500. The total is deducted from the seller's proceeds.

Section 600, Cash at Settlement To/From Seller

Lines 601 is the gross amount due to the seller, from line 420.

Line 602 contains the total of reductions in seller's proceeds, from line 520.

Line 603 is the difference between lines 601 and 602. It usually indicates a cash amount paid to seller, but it's possible for the seller to owe money at closing. For instance, the seller might owe more on first and second mortgages than is recovered in the contract.

Whew! That took a bit, but the article is really just an overview of the closing statement, and mentions only the most common entries. I hope it gave you a better understanding of the HUD-1.