Calculating the Amount of Money You Need at Closing

This page is located on the U.S. Department of Housing and Urban Development’s Homes and Communities Web site at http://www.hud.gov/offices/hsg/sfh/res/sc3sectb.cfm.

Calculating the Amount You Need at Settlement

Disclaimer

The first page of the HUD-1 Settlement Statement summarizes all the costs and adjustments for the borrower and seller. Section J is the summary of the borrower’s transaction and Section K is the summary of the seller’s side of the transaction. You may receive a copy of the seller’s side, but it is not required.

Section 100 summarizes the borrower’s costs, such as the contract cost of the house, any personal property being purchased, and the total settlement charges owed by the borrower from Section L.

Beginning at line 106, adjustments are made for items (such as taxes, assessments, fuel) that the seller has previously paid. If you will benefit from these items after settlement, you will usually repay the seller for that portion of the cost.

Here is an example for you to use in making your own calculations:

J. SUMMARY OF BORROWER’S TRANSACTION
100. GROSS AMOUNT DUE FROM BORROWER:
101. Contract sales price 100,000.00
102. Personal Property
103. Settlement charges to borrower (line 1400) 4,000.00
104.
105.
Adjustments for items paid by seller in advance
106. City/town taxes to
107. County taxes to
108. Assessments 6/30 to 7/31 (owners assn.) 40.00
109. Fuel Oil 25 gals. @ $1.00/gal. 25.00
110.
111.
112.
120. GROSS AMOUNT DUE FROM BORROWER 104,065.00

Assume in this example, the cost of the house is $100,000 and the borrower’s total settlement charges brought from Line 1400 of Section L are $4,000. Assume that the settlement date is July 1. Here the borrower has agreed to pay the seller for the $40 Home Owners Association dues that have been paid for the month of July and for the 25 gallons of fuel oil left in the tank. This is added for a gross amount due from the borrower of $104,065.

Section 200 lists the amount paid by the borrower or on behalf of the borrower. This will include the deposit of earnest money you put down with the agreement of sale, the loan(s) you are getting and any loan you may be assuming.

Beginning at Line 210, adjustments are made for items that the seller owes (such as taxes, assessments) but for which you as the borrower will pay after settlement. The seller will usually pay you or credit you this portion at settlement.

200. AMOUNTS PAID BY OR IN BEHALF OF BORROWER:
201. Deposit of earnest money 2,000.00
202. Principal amount of new loan(s) 80,000.00
203. Existing loan(s) taken subject to
204.
205.
206.
207.
208.
209.
Adjustments for items unpaid by seller
210. City/town taxes to
211. County taxes 1/1 to 6/30 $1,200/ year 600.00
212. Assessments 1/1 to 6/30 $200/yr. 100.00
213.
214.
215.
216.
217.
218.
219.
220. TOTAL PAID BY/FOR BORROWER 82,700.00

In this example, assume the borrower paid an earnest deposit of $2,000 and is getting a loan for $80,000. A tax of $1200 and an assessment of $200 are due at the end of the year. The seller will pay the borrower for six months or one-half of this amount. Line 220 shows the total $82,700 to be paid by or for the borrower.

Section 300 reflects the difference between the gross amount due from the borrower and the total amount paid by/for the borrower. Generally, line 303 will show the amount of cash the borrower must bring to settlement.

300. CASH AT SETTLEMENT FROM/TO BORROWER
301. Gross Amount due from borrower (line 120) 104,065.00
302. Less amounts paid by/for borrower (line 220) (82,700.00)
303. CASH (x FROM) ( _ TO) BORROWER 21,365.00

In this example, the borrower must bring $21,365.00 to settlement.

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