The Settlement Statement is essentially the financial picture of the closing. All money flowing into and out of settlement must appear on the form. The statement will show a detailed itemization of all the costs pertaining to the real estate sale or mortgage loan transaction.

In some areas, the settlement statement may be called the Closing Statement, the Settlement Disclosure Statement, or simply the Settlement sheet. The settlement agent will generally use a federal HUD-1 or HUD-1a form for most closings. The HUD-1 or HUD -1a form is required by Federal law for any transaction that involves a federally related mortgage, but is not limited for that use. Although the HUD form is the most common form of Settlement Statement, the settlement agent may choose to use a less formal Settlement Statement for closings not governed by HUD regulations, such as commercial property closings or investment property closings. The explanation of the HUD Settlement Statement described here would be similar for any custom form created by the closing agent.

In Pennsylvania, the settlement statement is prepared by the closing agent. A separate statement may be prepared for the seller and the buyer, or the statement may disclose both the sellers’ and the buyers’ charges on the same form. If charges shown on the Settlement Statement were already paid prior to closing, these charges will be shown on the statement as “P.O.C.”, meaning “paid outside of the closing”.

The following is a brief explanation of the HUD-1 Form:

Be aware that "Buyers" are referred to as "Borrowers" on the actual HUD-1 form even though the HUD-1 form may be used when there is no loan involved, such as in a cash transaction. For better clarity, we will simply reference "buyers" and "sellers" as appropriate.

The HUD-1 Settlement Statement consists of two main pages. Page 1 of statement shows the summary of the transaction. Page 2 shows the details of most of the closing costs for the transaction, and will provide an acknowledgement section for the parties to approve the statement.

On Page 1 of the statement, the top portion of the page shows Sections A through Section I. These sections show the basic reference information about the transaction, including the property address or location of the real estate; the settlement date and funding date; the settlement agent and place of settlement; loan type and file numbers, and the names and addresses of the parties to the transaction: Buyers, Sellers, and Lender.

The bottom portion of page 1 is divided into two columns: Section J and Section K. These two sections give the financial summary of the transaction. Section J is the summary of the Buyers transaction and Section K is the summary of the Sellers transaction.

Section J, being the Buyers transaction summary, is further broken down into numbered sections detailing the Buyer’s debits (section 100), the Buyers credits (section 200) and totals (section 300).

Section 100 shows what the Buyer owes, such as the purchase price of the home.

Line 103 reflects the settlement charges paid by the Buyer, which are itemized on Page 2 of the Settlement Statement and carried over from Line 1400.

Line 120 is the total of what the Buyer owes. 

Section 200 shows what credits the Buyer has, such as the loan amount, the deposit made by the Buyer and any money owed to the Buyer by the Seller at time of closing, such as prorations for taxes and public utility charges left unpaid by the Seller.

Section 300 carries the totals down to the bottom of the page. Line 301 is the same as Line 120; Line 302 is the same as Line 220, and Line 303 is the total "cash" due from the Buyer at closing.

Line 303: The buyer is expected to bring a cashiers check or other certified funds for this amount to closing, or arrange to have that amount wired to the Escrow Disbursement account of the Settlement Agent at or before the actual closing.

Section K, being the Sellers transaction summary, is further broken down into numbered sections detailing the Seller’s credits (section 400), the Seller’s debits (section 500) and totals (section 600).

Section 400 reflects the credits due the Seller at closing, such as the sales price of the home, and any money owed to the Seller by the Buyer at time of closing, such as prorations for taxes and public utility charges prepaid by the Seller.

Line 420 shows the total credits due to the Seller at closing.

Section 500 reflects the charges or debits of the Seller.

Line 502 reflects the settlement charges paid by the Seller, which are itemized on Page 2 of the Settlement Statement and carried over from Line 1400.

Lines 503, 504, etc. usually reflect the full payment amounts of any mortgage loans or other liens still owed and encumbering the property.

Line 520 shows the total debits due from the Seller at closing.

Section 600 carries the totals down to the bottom of the form. Line 601 is the same as Line 420; Line 602 is the same as Line 520, and Line 603 is the total "cash" due to the Seller at closing. This total cash due to the seller is often referred to as the “Sale proceeds”.

Page 2 of the settlement statement contains Section L, "Settlement Charges," with separate Buyer and Seller columns. Section L is further divided into numbered Sections 700 through 1300, and ends with Line 1400.

Section 700 reflects the amount of commission to be paid to the real estate brokers.

Section 800 discloses all loan-related costs such as origination fees and discount points. These costs should match the Truth-in-Lending statement (or “TIL”) provided to the Buyer by the Lender in advance of the closing.

Section 900 reflects any items that the Lender requires be paid in advance, such as preliminary interest or the first year’s hazard insurance premium.

Section 1000 reflects items that are require by the lender to be held in escrow, such as deposits for taxes and insurance. The lender will collect and hold these amounts for payment of future bills.

Section 1100 reflects the title insurance costs and related charges for the closing services provided. These are charges payable to the title company, settlement agent, and/or their representatives. This section shows the actual premium charged for the title insurance and the amount of policy coverage provided.

Section 1200 reflects the county recording fees and any transfer taxes owed for documents created in the transaction, such as the deed and mortgage.

Section 1300 reflects any additional settlement charges, such as survey or pest inspection fees that do not specifically belong in the aforementioned sections.

Line 1400 reflects the total of charges for the Buyer and the Seller. The total due from the Buyer is carried over to Page 1, Line 103. The total due from the Seller is carried over to Page 1, Line 502.

Once you are satisfied that the information shown on the HUD-1 Settlement Statement is complete and accurate, you will be asked to sign the statement, indicating your approval for the disbursement of funds in connection with the transaction. The Settlement Agent will also sign the HUD-1, certifying that the information shown is accurate and that disbursement of the funds will be made in accordance with the Statement.