Real Estate Settlements

Settlement Charges
(HUD – 1 page 2)

The second page of the settlement statement itemizes all settlement fees assessed to the Buyer and Seller. Note: Any items paid by the parties outside of, or prior to, closing, are shown as P.O.C. (Paid Outside of Closing).

Section 700: Real Estate Commissions

Section 700

Line 700: Calculation of Total Commission
This usually is a percentage of the sales price of the property. In cases where the Buyer also used an agent, the total real estate commission will be divided equally between the Seller's agent and Buyer's agent on lines 701 and 702. If there is no Buyer's agent, the Seller's agent is entitled to the total commission.

Line 701
Amount of Commission to be paid to Seller's Agent.

Line 702
Amount of Commission to be paid to Buyer's agent.

Line 703: Commission Paid at Settlement
Typically the total real estate commission will be paid by the Seller, less any deposit being held by the broker.

Line 704
This section will set forth any additional administrative fees charged by the respective real estate agents to their clients.

Section 800: Items Payable in Connection with Loan

Section 800

Typically paid by the Buyer, except in certain VA or FHA loans, or if otherwise negotiated by the parties.

Line 801: Loan Origination Fee
This fee is typically a percentage of the amount of the new loan. It compensates the Lender for the expense of processing the loan. VA loans require that the veteran Buyer pay no more than 1% of the loan amount.

Line 802: Loan Discount
These are the "points" charged by the Lender to increase its yield on a loan with a below market interest rate. One point is equal to one percent of the loan amount. The responsibility of the Buyer and the Seller for payment of points should be stipulated in the sales contract.

Line 803: Appraisal Fee
Costs incurred by the Lender for appraising the property. This fee is usually paid by the Buyer at the time of the loan application.

Line 804: Credit Report
Cost incurred by the Lender for obtaining a credit report on the Buyer. This amount is usually paid by the Buyer at the time of the loan application.

Line 805: Lender's Inspection Fee
This Lender's charge applies when a Lender must re-inspect the property after repairs have been made. Some government loans require that the Seller pay this fee.

Line 806: Mortgage Insurance Application Fee
This is no longer a customary fee.

Line 807: Assumption Fee
On assumptions or wrap loans, the Lender usually charges the Buyer a fee for processing the paperwork necessary to transfer the existing loan to the Buyer.

Section 900: Items Required by Lender to be Paid in Advance

Section 900

Line 901: Interest
"Per Diem" (per day) interest on the new loan from the date of settlement to the end of the month in which the loan closes.

Line 902: Mortgage Insurance Premium
Most Lenders require mortgage insurance on conventional loans which exceed 80% of the purchase price or appraised value, whichever is less. This insurance, paid by the Buyer, protects the Lender against losses if the Buyer defaults on the loan. Lender's requirements vary. The Lender should inform the Buyer at the time of the loan application whether mortgage insurance will be necessary. On FHA loans, Buyers will be required to pay a one-time up front mortgage insurance premium in addition to the monthly mortgage insurance.

Line 903: Hazard Insurance Premium
Most Lenders will require that a full years hazard insurance premium is paid prior to, or at the time of settlement.

Section 1000: Reserves Deposited with Lender (i.e. Escrows)

Section 1000

Funds to cover these items are collected in advance from the Buyer and are held in escrow by the Lender to pay future obligations as they become due. The amounts collected at settlement depend upon the number of monthly payments to be made by the Buyer from the date of settlement until each charge is due.

Line 1001: Hazard Insurance
This is usually paid by the Lender on an annual basis.

Line 1002: Mortgage Insurance
This is only required on loans with high "loan to value" ratios – that is where the loan amount is greater than 80% of the appraised value of the property.

Line 1003: City/Town Taxes
When a property is located within a city or town, there may be additional local real estate taxes due.

Line 1004: County Taxes
County real estate taxes. Borrowers can now pay the real estate taxes on their principal residence on a bi-annual basis, which often reduces the amount of taxes to be collected at settlement. This only applies to the Borrower's principal residence.

Section 1100: Title Charges

Section 1100

These fees are typically paid by the Buyer.

Line 1101: Settlement or Closing Fee
The fee charged by settlement agents for conducting the settlement.

Line 1102: Abstract or Title Search
The fee charged by the title abstractor to research the land records and other public records to establish the Seller's title to the property to be conveyed. Typical searches go back 60 years.

Line 1103: Title Examination
The attorney's fee to review the title abstract and to determine if the Seller has good title to convey.

Line 1104: Title Insurance Binder
The fee charged by the settlement agent for issuing a title insurance commitment protecting both the Lender and the Buyer. The final Lender's and Owner's policies are issued after the conveyance documents are recorded.

Line 1105: Document Preparation
The title company or attorney's fee for preparing the Deed, Deed of Trust, and other related documents.

Line 1106: Notary Fees
The fee charged by the Notary Public for notarizing documents.

Line 1107: Attorney Fees
The fee charged by attorneys for services above and beyond the customary services included in the title examination fee.

Line 1108: Title Insurance
The total premium for Lender's and Owner's title insurance policies, as applicable.

Line 1109: Lender's Coverage
The premium charged by the title agent to issue a Lender's policy of title insurance in the face amount of the loan amount. Almost always required by the Lender.

Line 1110: Owner's Coverage
The premium charged by the title agent to issue an Owner's policy of title insurance. This is usually issued in an amount equal to the sales price of the property. Coverage is at the option of the Buyer.

Line 1111: Preparation/Obtaining/Recording Release
The fee charged to Seller by the settlement agent to prepare, obtain from Seller's Lender, and record in the land records releases for any loans outstanding on the property.

Section 1200: Government Recording and Transfer Charges

Section 1200

Line 1201: Recording Fees
The fee charged by the County to record and index the documents of conveyance including the deed, deed of trust or mortgage.

Line 1202: City/County Tax/Stamps (i.e. Recordation Tax)
Documentary Stamps are assessed on the purchase price or loan amount, whichever is greater

Line 1203: State Tax/Stamps
State tax assessed on the value (i.e. sales price) of the property being transferred. Currently equal to .5% of the sales price.

Line 1204: County Transfer Tax
County tax assessed on the value (i.e. sales price) of the property being transferred. Currently not all counties in Maryland assess a county transfer tax.

Section 1300: Additional Settlement Charges

Section 1300

Line 1301: Survey
The fee for the preparation of the house location survey which locates the improvements on the property. Among other things, the house location survey will show encroachments or violations of set back lines. This is typically paid by the Buyer.

Line 1302: Pest Inspection
The termite inspection fee. This is typically paid by the Buyer.

Lines 1303 – 1305
Other miscellaneous fees and costs, such as well and septic tests.