What is the purpose of the HUD-1 document during a closing?

The HUD-1 document, also known as the settlement statement, serves as a critical tool in the closing process of a real estate transaction. Its primary purpose is to provide a comprehensive listing of all financial transactions involved in the closing. This includes all costs and payments associated with the purchase of the property, as well as any adjustments for items like property taxes and utilities that must be divided between the buyer and seller. It ensures transparency by detailing all fees, expenses, and charges, enabling both parties to understand exactly what is being paid and to whom. Thus, selecting that the HUD-1 lists party payments accurately reflects its function in the closing process.

While other documents may validate borrower income, document property inspections, or outline loan terms, these roles are not associated with the HUD-1. Each of those activities is typically covered by other forms or processes within the lending and closing framework.