HUD-1 Settlement Statement

The HUD-1 Settlement Statement details the transaction of your home purchase. The form is divided in half, with a left side and a right side. The rows on the left are for the borrower; they detail all money the borrower pays at the closing and all money that is refunded to them, including all money that has already been paid, and all money that must be paid to the lender, seller, attorney, and others. For example, a borrower pays the points, application and processing fees during the closing.

The right side of this form, the seller's side, details the proceeds of the loan (what the seller is due), and perhaps the payoff of the seller's mortgage. The taxes, insurance, (hazard and, if applicable, mortgage insurance) will be detailed here and must be verified by the attorney handling the closing. There is an addendum to the HUD-1 Settlement Statement that shows the breakdown of the escrow funds (an escrow fund is money collected by the bank to pay your tax and insurance bills). Because the closing attorney is an agent for the mortgage lender, MassHousing recommends that you have your own attorney present at the closing.

The Mortgage Note

The mortgage note represents your promise to pay the lender according to the agreed upon terms. It is, in effect, a legal IOU. The Note also details the penalties that will be assessed if you default (that is, if you fall behind in repaying the loan), and warns you that the lender can "call the loan" (i.e., require full payment before the end of the loan term) if you fail to make the required payments.

The Mortgage

The mortgage is the legal document that secures the note and gives the lender a claim against your house if you default on the note's terms. In effect, you have possession of the property, but the lender has partial ownership until the loan has been repaid in full. The mortgage restates the date of the final scheduled payment. It states the responsibilities of the borrower to pay principal, interest, taxes, and insurance in a timely manner; to maintain hazard insurance on the property without lapse; and to adequately maintain the property and not allow it to deteriorate. The mortgage also states that if the borrower fails to comply with these requirements, the lender can demand full payment of the loan balance. Moreover, if the borrower defaults, the lender can foreclose on the property, sell it, and use the proceeds to pay off the outstanding loan and the foreclosure costs.

The Mortgage Rider: The Final Truth-in-Lending

Statement. Lenders are required to give this to all loan applicants within three days of receiving their initial application. It discloses the annual percentage rate (APR), which reflects the cost of the mortgage as a yearly rate. This rate may be higher than the interest rate stated in the mortgage because the APR includes any points, fees, and other costs of credit. The Truth-in-Lending statement also sets the other terms of the loan, including the finance charge, the amount financed and the total payment required.

HUD Addendum. A breakdown and projection of escrowed monies that the lender will collect from the borrower for taxes, hazard insurance, and mortgage insurance.

Lead Paint Indemnification or Disclosure. A form, signed by the borrower, in which the borrower agrees to hold harmless the lender and the Agency in the event of lead paint poisoning of any child under the age of 6.

Urea Formaldehyde Foam Insulation (UFFI):

Disclosure & Indemnification. The seller and the borrower both sign this form. The seller attests to the presence or absence of UFFI, and the buyer indemnifies the lender and the Agency based on the seller's statement.

Cranston-Gonzales Disclosure

An estimate that indicates to the borrower the chance (expressed as a percentage) of whether or not the lender that originated the mortgage loan will collect the monthly payments once the loan is closed. Servicing, (i.e., collection of monthly mortgage payments, and in cases of delinquent accounts, collection of past-due payments or initiation of the foreclosure process) is often sold like a commodity to another institution or agent that handles the mortgage through its term.

Deed

The seller must bring the deed to the closing, properly signed and notarized. The deed is the document that transfers ownership from the seller to the buyer.

Other common lender forms include the following:

• Final Mortgage Application


• Taxpayer Certification and Identification


• IRS Form W-9


• Smoke Detector Certification