Q and A with Bankrate.com

Courtesy of Bankrate.com for The Marshfield Mariner, March 7th, 2012
Question:  What is a settlement statement?
Answer:  Before you close on a mortgage, you will need to make sure the final costs of the loan are in line with the estimates you were given when you applied.  That is where the settlement statement comes in.
The U.S. Department of Housing and Urban Development’s line-by-line itemization of costs, called a HUD-1, or settlement statement, is a three-page form that shows you your actual closing costs when you sign your loan papers and finalize your mortgage.  This document is used for both home purchases and refinances.
This document shows key items about your mortgage including what type of mortgage you are taking out, how much you are borrowing, how long you are borrowing it for, your interest rate, and your initial monthly payment.  In addition, the HUD-1 shows the fee that the lender is charging you for the service of arranging your mortgage financing — the origination fee — and any points you have chosen to pay to lower your interest rate.  It indicates whether your interest rate can change and, if so, by how much and how often; it shows whether your loan balance can rise; whether your loan has a prepayment penalty; and whether your loan has a balloon payment.
Question:  How does this differ from the good faith estimate?
Answer:  The settlement statement allows you to compare your final closing costs with the closing cost estimate your lender gave you when you began the mortgage process.  Those approximate costs appear on your good faith estimate.  By comparing your good faith estimate to your settlement statement at closing, you can make sure your lender is honoring its initial offer.  Lenders are not allowed to change the origination fees or points they promise you up front.
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