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HUD Closing Disclosure

This is the new closing disclosure. It takes the place of the old HUD-1 Settlement Statement. This is what they’re using for the Settlement Statement now, but now it’s called the Closing Disclosure or the CD. The numbers are the same, but the format is a little bit different. And I wanted to go over the numbers.

Format and sections

So it has basic information at the top. The date of closing, the settlement agent, property address, purchase price, borrower name, seller name, lender, some basics, loan type. Then you get into the numbers. You’ve got the loan amount, the interest rate, the monthly principal and interest payment, which is just the mortgage not including taxes and insurance. Can this amount increase after closing? No, no. So that means that this is a fixed rate mortgage, not an adjustable rate mortgage. Does the loan have any pre-payment penalty? In this case, it’s yes. But I don’t know many loans that still have a pre-payment penalty. Usually that should be no. Keep in mind, this is just a sample worksheet. Balloon payment? No. Principal and interest for the first seven years and for the latter eight to 30 years, it’s the same because it’s a fixed rate mortgage.

Mortgage insurance and escrows

Apparently, this sample has mortgage insurance initially. There’s your tax escrow, taxes and homeowner’s insurance, estimated total payment. This is the estimated escrow with taxes and insurance. And apparently in this example, mortgage insurance. There’s no homeowner dues in this case, at least not in the escrow. Usually homeowner’s dues are not escrowed, they’re paid separately.

Closing costs and cash needed at settlement

Total closing costs, total cash to close. So this is the figure here that you need to focus on. You would need to wire or have a cashier’s check ready for payable to the settlement agent for the remaining funds due at closing.

Lender costs

On the next page, it goes into the details of how this total closing cost figure was derived. And they go through loan costs. Any points, application fee, underwriting fee. This gets into appraisal fees, tax service fees, any other lender fees.

Title fees

Then it gets into services the borrower did shop for. These are your title fees, survey, all those sorts of things. And then you get a subtotal. Then you go down into the other cost.

Government taxes and escrows

This is going to be all of the recordation fees, any transfer taxes. And any prepaids, which was setting up the homeowners insurance escrow, the property tax escrow. And then you get into ‘Other’. If it is an HOA or a condo and there’s any initial condo fees or HOA fees due, you’ll see them here. Any home inspection fee that’s still outstanding, any home warranty. Then you’ve got another subtotal and then the grand total.

Initial disclosure versus final disclosure

Then on the next page, you get into an analysis of what was initially disclosed to you and what the final numbers are. And those should be pretty close. This is actually a surprising difference, but again, it’s just a sample. Downpayment, same. Deposit, same. Apparently, in this hypothetical, there was a seller credit negotiated after the initial contract and the initial good faith estimate.

Summary numbers

This gets into a summary of the amount due, which is $189,762. You’ve got your purchase price, your closing cost, a little bit of HOA dues, that totals here. And then you’ve got your credits. You’ve already paid $10,000 as a deposit. This is the loan amount you’re getting that they will deduct from the amount due. There’s a seller credit, there’s a rebate, etc. So you’ve got your total, minus the credits. Again, this is the cash due that you’ll need to be ready to have a cashier’s check or a wire prepared in advance for closing.

Fine print

The following page goes over some basic summary. Is your loan assumable? Is there any demand feature like a balloon? When is the loan considered late? Very basic things on this page. And then the very last page gets into some total figures. What the total amount of payments that you would make over the life of the loan are the finance charge, the interest, your original principal, the APR. So very basic things. And then it closes with all the contact information, your lender, real estate broker, the listing agent, the settlement agent. That is the new CD or Closing Disclosure, formerly the HUD-1 Settlement Statement.

*This video uses a sample document with random information, and the numbers used are meant only to be illustrative.

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