What Is a Closing Statement Definition and Examples

A closing statement is a document that records the details of a financial transaction. Homebuyers who finance the purchase receive a closing statement from the bank, while the home seller receives one from the real estate agent who handled the sale. All loans have closing statements, though they vary in complexity.

Key Takeaways:

– A mortgage closing statement lists all costs and fees associated with the loan, as well as the total amount and payment schedule.

– A closing statement or credit agreement is provided with any type of loan, often with the application itself.

– A seller’s Closing Disclosure is prepared by a settlement agent and lists all commissions, costs, and the net total to be paid to the seller.

– With some loans, a Truth in Lending Disclosure form may be provided instead of a Closing Disclosure.

Understanding the Closing Statement:

When financing a home purchase, buyers can expect to see a loan estimate within three days of applying for a mortgage. Prior to closing, the buyer will receive the final Closing Disclosure. Sellers will receive a similar Closing Disclosure that reflects their information along with their rights and obligations.

The Mortgage Closing Statement:

Reading and accepting the final Closing Disclosure is one of the last steps a borrower must take before signing and accepting the money for a mortgage or refinancing. The final Closing Disclosure is preceded by the loan estimate, which estimates the fees and charges the borrower will face at closing. The final Closing Disclosure should not significantly differ from the initial loan estimate, which should be received within three days of submitting the loan application.

The final Closing Disclosure is given to the borrower at least three business days before closing. It contains a detailed list of every fee and charge the borrower must pay and to whom it will be paid. The gross amount due will be adjusted to reflect any costs already paid by the borrower. The final disclosure presents all figures side by side with the initial loan estimate for easy comparison and includes loan details such as interest rate, monthly payments, and payment schedule.

Note:

It’s important to carefully review the mortgage closing statement for correctness and discrepancies.

Other Loan Closing Statements:

Virtually any other type of loan comes with its own closing statement, which may also be called a settlement sheet or credit agreement. In a revolving credit loan, such as a credit card or a bank line of credit, closing details are usually reported in the credit application, with the borrower’s signature indicating agreement to the lending terms. Personal loans that involve a large lump sum, with or without collateral, typically utilize a more complex document.

Reverse mortgages require a HUD-1 Settlement Statement and a Truth in Lending Disclosure form instead of a standard Closing Disclosure. Home equity lines of credit (HELOCs) may provide a Truth in Lending Disclosure form but not a HUD-1 Settlement Statement or a Closing Disclosure.

Note:

The Truth in Lending Disclosure provides important information about the cost of credit, including the annual percentage rate (APR).

The Seller’s Closing Statement:

The seller will receive the final closing documents, including the Closing Disclosure, from a settlement agent working with the selected title company. These documents list all commissions, fees, credits, and the bottom-line figure the seller will receive once the transaction is finalized. The Consumer Financial Protection Bureau requires the seller to receive this statement.

Tip:

When selling a home at a profit, the closing statement is needed to record the sale details for tax purposes.

Components of a Closing Statement:

The closing statement contains information related to the cost of buying or selling a home and can include details of the property itself. Generally, closing statements include:

– Property details: address, date built, type of structure.

– Financial information: purchase price, buyer deposits, seller credits.

– Prorated amounts: property taxes, homeowners association fees.

– Loan costs: including points, underwriting and origination fees, mortgage insurance premiums, and prepaid interest.

– Miscellaneous loan costs: appraisal fees, credit report fees, research fees, survey fees, inspection fees, pest inspection fees.

– Escrow and recording fees: detailed along with government entity recording fees.

– Commissions: specifying what was paid in real estate commissions.

Note:

This information is also reported on the Closing Disclosure if required by the loan.

Example of Real Estate Closing Statements:

The American Land Title Association (ALTA) provides sample closing statements for both buyers and sellers in a real estate transaction. The statements are similar, with slight differences in the reported information. A sample seller closing statement is provided below, and the buyer closing statement can be downloaded on the ALTA website.