A HUD Guide - Revised Edition

Introduction

For many people, buying a home is the single most significant financial step of a lifetime. The Real Estate Settlement Procedures Act of 1974 (RESPA), a Federal statute, helps to protect you at this step.

Settlement is the formal process by which ownership of real property passes from seller to buyer. It is the end of the home buying process, the time when title to the Property is transferred from the seller to the buyer.

RESPA covers most residential mortgage loans used to finance the purchase of one- to four-family properties, such as a house, a condominium or cooperative apartment unit, a lot with a manufactured home, or a lot on which you will build a house or place a manufactured home immediately following settlement. RESPA does not apply to loans to refinance the home. RESPA is not designed to set the prices of settlement services. Instead, it provides you with information to take the mystery out of the settlement process, so that you can shop for settlement services and make informed decisions.

This information booklet was prepared as provided in RESPA by the Assistant Secretary for Housing - Federal Housing Commissioner of the U.S. Department of Housing and Urban Development.

Part One of this booklet describes the settlement process and nature of charges and suggests questions you might ask of lenders, attorneys and others to clarify what services they will provide you for the charges quoted. It also contains information on your rights and remedies available under RESPA, and alerts you to unfair or illegal Practices.

Part Two of this booklet is an item -by-item explanation of settlement services and costs, with sample forms and worksheets that will help you in making cost comparisons. Remember that terminology varies by locality so that terminology used here may not exactly match that used in your area. For example, settlement is sometimes called closing, and settlement charges are frequently referred to as closing costs.

Part 1

• What Happens and When
• Shopping for Services
• Role of the Broker
• Negotiating a Sales Contract
• Selecting an Attorney
• Selecting a Lender
• Selecting a Settlement Agent
• Securing Title Services
• Home Buyers' Right
• Special Information Booklet
• Good Faith Estimate
• Lender Designation of Settlement Service Providers
• Disclosure of Settlement Costs One Day Before Closing and Delivery
• Escrow Closing
• Truth-in-Lending
• Protection Against Unfair Practices
• Kickbacks
• Title Companies
• Fair Credit Reporting
• Equal Credit Opportunity
• The Right to File Complaints
• Home Buyer's Obligation (Repayment of Loan and Maintenance of Home)

Part 2

• Specific Settlement Services
• HUD-1 Settlement Statement
• Settlement Costs Worksheet
• Comparing Lender Costs
• Calculating the Borrower's Transaction
• Reserve Accounts
• Adjustments between Buyer and Seller