How to Read a HUD Settlement Statement

You've got a closing in a few days and a PDF landed in your inbox with two columns, a wall of line numbers, and a bottom line that doesn't match the number you had in your head. You need to know what you're looking at before you sign anything, not after.

Here's the answer. A HUD Settlement Statement, officially the HUD-1, lists every dollar that moves in a real estate closing. It has a borrower column and a seller column. Each line item is money owed, money credited, or money already paid outside closing. The bottom of each column is what that party actually pays or actually walks away with. If you read nothing else, read the bottom line of your column and then work backward through the lines that got you there.

Most residential mortgage closings today use a form called the Closing Disclosure instead, not the HUD-1. You'll still see the HUD-1 on cash purchases, reverse mortgages, some commercial deals, and HUD-insured loans. The logic is identical either way. Once you can read one, you can read the other.

What a HUD-1 Actually Is, and When You Still See One

The HUD-1 was the standard settlement form for nearly every closing in the country until 2015. That year, the Consumer Financial Protection Bureau folded it into a new document called the Closing Disclosure for most consumer mortgages. If you're buying a house with a conventional loan, you're probably looking at a Closing Disclosure, not a HUD-1, even if someone at the title company calls it "the HUD" out of habit. That habit is common enough that I still say it myself.

The actual HUD-1 form survives for transactions the CFPB rule doesn't cover: cash deals, some investment property purchases, reverse mortgages, and HUD/FHA-insured loans in specific categories. If you're an investor buying with cash or through a portfolio lender, there's a real chance you're holding an actual HUD-1.

Either form does the same job. It reconciles every dollar in the deal and tells both sides what they owe or receive.

The Two Columns You Need to Understand

The HUD-1 splits into a borrower side and a seller side. Read your side first.

Each column works the same way. Debits are charges, money that party owes. Credits are money already accounted for, like an earnest deposit or a prorated tax credit. The form subtracts credits from debits and gives you a final number.

For the buyer, that final number is cash to close, what you need to wire before you get keys. For the seller, it's net proceeds, what actually lands in their account after every payoff and fee.

Line by Line: The Sections That Matter

You don't need to memorize all 1,000-series line numbers. You need to know what lives in each block.

Lines 100-200 (Gross Amount Due): the purchase price, plus anything added to it, like a deposit the buyer is financing separately.

Lines 200-300 (Amount Paid By or For Borrower): earnest money, loan proceeds, and seller credits toward closing costs. This is where your deposit shows back up as a credit.

Lines 500-600 (Reductions in Amount Due to Seller): the payoff of the seller's existing mortgage, real estate commission, and any credits owed to the buyer.

Lines 700 (Total Sales/Broker's Commission): who's getting paid and how much, split by side.

Lines 800-900 (Items Payable in Connection with Loan): origination fees, appraisal, credit report, and other lender charges.

Lines 1000-1100 (Reserves Deposited with Lender): your escrow account for taxes and insurance, funded up front.

Lines 1100-1200 (Title Charges): the title search, title insurance premium, closing or settlement fee, and attorney fees if your state uses one.

Lines 1200-1300 (Government Recording and Transfer Charges): recording fees and transfer taxes, which vary a lot by county and state.

Lines 1300-1400 (Additional Settlement Charges): survey, pest inspection, anything specific to that deal.

The pattern to notice: line items either increase what you owe or decrease it. Nothing on this form is decorative. If a number appears, it moved.

A Worked Example

Say you're buying an investment property for $310,000 cash. No loan, so no origination fees or lender reserves, which makes this a cleaner first read.

Borrower side:

• Purchase price: $310,000
• Title insurance and closing fee: $2,100
• Recording and transfer charges: $850
• Prorated property tax credit from seller (seller owned it for 7 months this year, you get credit for the other 5): $1,458
• Earnest money already paid: $10,000

Debits: $310,000 + $2,100 + $850 = $312,950 Credits: $1,458 + $10,000 = $11,458 Cash to close: $312,950 minus $11,458 = $301,492

Seller side:

• Purchase price credit: $310,000
• Existing mortgage payoff: $145,000
• Real estate commission at 6%: $18,600
• Title charges assigned to seller (varies by state and contract): $1,200
• Property tax proration owed to buyer: $1,458

Debits: $145,000 + $18,600 + $1,200 + $1,458 = $166,258 Net proceeds: $310,000 minus $166,258 = $143,742

That's the whole exercise. Every fee either adds to what one side owes or subtracts from what they get back. Once you see the pattern, the wall of numbers turns into six or seven decisions someone made, each with a dollar amount attached.

What People Get Wrong When Reading Settlement Statements

The most common mistake is only checking the bottom line and skipping the lines that built it. A wrong prorated tax credit or a duplicated fee will change your total, and you won't catch it if you don't check the math yourself.

The second mistake is assuming the settlement statement and the loan estimate should match exactly. They don't have to. Some fees shift between estimate and closing within legal tolerances, some don't move at all, and some change because you picked a different insurance policy or negotiated a credit late in the process. A difference isn't automatically an error. It's a reason to ask a specific question about a specific line.

The third mistake is not comparing the HUD-1 or Closing Disclosure against your purchase contract. The commission split, who pays transfer tax, who pays for the survey, all of that should trace back to what you actually agreed to in writing. If a line doesn't match the contract, that's the one to flag before you sign, not after you've wired funds.

One Thing This Statement Won't Tell You

The settlement statement tells you what the deal costs. It doesn't tell you whether the deal was priced right in the first place. You can have a mathematically perfect HUD-1 attached to a purchase price that was too high, or a rehab budget that was too optimistic before you ever got to closing. Reading the form well protects you from a bad closing. It doesn't protect you from a bad deal. Those are two different problems, and I've seen investors solve the first one carefully while missing the second entirely.

If you're at the point where you're staring down a settlement statement, you're close enough to a deal that it's worth having the analysis done right before you get there, not after. That's what Deal Machine is built for, running the actual numbers on a property before you're the one holding a closing statement with your name on it. You can find it at readmoneydecoded.com/deal-machine.

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