Which Type of Loan Will Use a HUD-1 in Place of a Closing Disclosure

If you’re getting a mortgage, you may be wondering which type of loan will require a HUD-1 instead of a Closing Disclosure. Here’s what you need to know.

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Introduction

home purchase, you will receive two documents at closing: a HUD-1 Settlement Statement and a final Truth-in-Lending Disclosure Statement. The HUD-1 will list all charges imposed on the borrower and seller in connection with the loan transaction, while the TIL will provide more detail on the actual costs of borrowing.

What is a HUD-1?

The HUD-1 is a form that Itemizes all charges imposed on the borrower and all charges imposed on the seller in a real estate transaction. The form is federally required for all home sales that involve federally related mortgages, and must be given to buyers at least one day before closing.

What is a Closing Disclosure?

The Closing Disclosure, or CD, replaced the Truth in Lending Act (TILA) HUD-1 Settlement Statement in October 2015, as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Whereas the TILA HUD-1 Settlement Statement itemized costs paid by the borrower and seller at closing, the CD provides an overview of the loan terms and costs. The CD also gives an estimate of how much money the borrower will need to bring to closing and when funds are due.

Differences Between a HUD-1 and a Closing Disclosure

There are several major differences between a HUD-1 and a Closing Disclosure. The most obvious difference is the purpose of the document. A HUD-1 is used to itemize all the charges that are paid in connection with the loan at closing. The Closing Disclosure is used to itemize all of the charges that are due at closing.

The second major difference is the format of the document. A HUD-1 is prepared by the lender and is a three-page document. The first page is a statement of who pays what at closing. The second page itemizes all of the charges for the borrower, and the third page itemizes all of the charges for the seller. The Closing Disclosure is a five-page document that includes all of the information from the HUD-1, plus information about changes that happened after the HUD-1 was prepared, such as an increase in taxes or insurance premiums.

The third major difference is when the documents are prepared. A HUD-1 must be prepared no later than one day before closing. The Closing Disclosure must be provided to the borrower no later than three business days before closing.

The fourth major difference is how changes are made to the documents. With a HUD-1, any changes that need to be made are made by hand on the original document. With a Closing Disclosure, any changes that need to be made must be done using a separate form called a revised Closing Disclosure.

The fifth and final major difference is that a HUD-1 can only be used for certain types of loans, while a Closing Disclosure can be used for any type of loan. Specifically, a HUD-1 can only be used for adjustable rate mortgages (ARMs), balloon loans, fair lending exception loans, and reverse mortgages (HECMs). For all other types of loans, including fixed rate mortgages and vacant land loans, a Closing Disclosure must be used in place of a HUD-1.

When is a HUD-1 Used in Place of a Closing Disclosure?

A HUD-1 may be used in place of a Closing Disclosure if the loan is a reverse mortgage, a manufactured housing loan, or a Title I or Title II loan.

Conclusion

The HUD-1 is used for most types of loans, including conventional, FHA, USDA, and VA loans. The only type of loan that does not use a HUD-1 is a reverse mortgage. If you are getting a reverse mortgage, you will receive a different form called the Good Faith Estimate (GFE).