Understanding the HUD-1 Settlement Statement: Structure, Costs, and When It Applies

The HUD-1 settlement statement represents one of the most important documents you’ll encounter in certain mortgage transactions. Created and standardized by the U.S. Department of Housing and Urban Development (HUD), this document itemizes every charge you’ll pay and every credit you’ll receive when finalizing your loan. While historically used for conventional mortgages applied for before October 3, 2015, today the HUD-1 settlement statement serves primarily reverse mortgage transactions—particularly Home Equity Conversion Mortgages (HECMs) backed by the Federal Housing Administration (FHA).

Understanding what appears on this three-page document before you sign closing papers can help you identify potential discrepancies and make informed decisions about your loan’s true cost.

Core Components of Your Settlement Document

A HUD-1 settlement statement breaks down into three distinct sections, each serving a specific purpose in showing you the complete financial picture of your transaction.

The first page captures your personal identifying information, details about the property in question, and—if real estate is changing hands—a comprehensive breakdown of both buyer and seller costs. This foundational section establishes the context for all subsequent financial disclosures.

The second page represents the heart of the document, detailing every fee and charge associated with your loan. This is where you’ll discover how much your lender is charging to originate the loan, what discount points you’ve agreed to pay in exchange for a lower interest rate, and various third-party fees for services like home appraisal, credit report review, and flood certification. For reverse mortgage borrowers, this page also reveals the mandatory mortgage insurance premiums that federally insured reverse mortgages require.

The third page provides a critical comparison tool: it shows how the closing costs you’re now asked to pay compare to the good faith estimate (GFE) you received when you first applied for your loan. This section also restates your loan terms—the principal amount, repayment schedule, interest rate, and whether your rate is fixed or adjustable.

Breaking Down Closing Costs by Category

The loan fees documented on a HUD-1 settlement statement organize into meaningful categories that help borrowers understand where their money is going.

Lender Charges and Origination Fees represent what the financial institution is charging to process and issue your loan. This section will show the origination fee itself, any discount points you’ve elected to purchase, and third-party fees that your lender has arranged—such as appraisal costs, credit report fees, flood certification, and tax service charges. These fees reflect the professional valuations and background checks that lenders require before committing capital.

Interest and Insurance Costs appear next. You’ll owe daily interest charges from your closing date through the end of the month. For reverse mortgage borrowers, this section includes the mortgage insurance premium that protects the lender. Additionally, any homeowners insurance premiums due at closing appear here, along with information about how ongoing insurance and property tax payments will be handled—either paid by you directly or withheld from your loan proceeds.

Reserve and Escrow Requirements detail how much you must fund upfront to cover property taxes, homeowners insurance, and mortgage insurance on a monthly basis. In traditional purchase scenarios where you’re putting down less than 20%, lenders typically require this escrow cushion. With reverse mortgages, these amounts might be withheld from your loan proceeds rather than paid from your own pocket.

Title and Legal Recording Costs cover the expenses associated with title insurance—both the lender’s policy (required) and an optional owner’s policy (recommended). Recording fees appear here as well, representing the cost to officially register your lender’s security interest in the property at the county or local government level.

Comparing Your Estimate Against Final Charges

One of the most valuable functions of the HUD-1 settlement statement lies in its comparison section. When you applied for your loan, your lender provided a good faith estimate detailing anticipated closing costs. The settlement statement now shows the actual charges you’re paying.

Federal regulations limit how much certain charges can vary from the GFE—specifically, no more than a 10% deviation is permitted on many items. This comparison section makes those variances visible, allowing you to question any surprises before you finalize the transaction. The settlement statement also details your loan’s legal terms: how much you’re borrowing, your repayment timeline, whether your interest rate could adjust over time, and whether the loan includes features like negative amortization or balloon payments.

Accessing and Reviewing Your Settlement Documents

The timing of when you receive your HUD-1 settlement statement matters significantly. Federal law requires your lender to provide this document to you no later than the business day before your loan closes—but only if you request it. If you don’t specifically ask, the first time you may see the form could be when you’re signing closing papers.

You have the option to waive your right to receive the document before closing and instead have it delivered or mailed afterward. However, this approach removes your opportunity to identify and resolve discrepancies while your lender still has an incentive to work with you. Actively requesting the settlement statement in advance, reviewing it carefully, and addressing any questions or concerns before closing represents a critical protective step.

If your loan has already closed, you should find your HUD-1 settlement statement among your closing documents. Your lender can provide a copy if you need to locate it after the transaction has settled.

It’s worth noting that for mortgage refinancing transactions—where there is no seller involved—your lender might utilize a HUD-1A form instead. This shortened version omits sections related to property sales and selling costs, streamlining the disclosure for refinance scenarios.

How the HUD-1 Differs from Modern Closing Disclosures

The relationship between HUD-1 settlement statements and the newer closing disclosure form represents an important distinction in today’s lending landscape. While the HUD-1 remains the standard for reverse mortgages and mortgages that closed on or before October 3, 2015, most contemporary real estate transactions now use the closing disclosure instead. Understanding this evolution helps borrowers recognize which document they should expect based on their specific loan type and timing.

Regardless of which form you receive, the fundamental principle remains the same: you deserve clear visibility into every cost associated with your loan before you commit to it. Taking time to carefully review these documents—asking questions and resolving concerns before the closing table—protects your financial interests and ensures you understand the true expense of your borrowing arrangement.