Mortgage Interest on the HUD-1 Settlement Statement

In most transactions, the first mortgage payment is due the first of the month following the next month. In other words, a transaction settlement on June 18 would have a first payment due date on August 1st, and the payment would include interest in arrears for the month of July.

What line item 901 on the HUD-1 Settlement Statement does is to collect the interest from the settlement date to the first of the next month, or in this case July 1st. That interest will not be included in the August payment, so must be collected at closing. Example in this case if the interest on the loan is $32.55/day:

$32.55 X 13 (days from June 18 through June 30) = $423.15

This is a DEBIT to the Buyer and in the left column, "Paid from Borrower's Funds at Settlement."