Closing Statement

What Is a Closing Statement?

A closing statement is a document that records the details of a financial transaction. A homebuyer who finances the purchase will receive a closing statement from the bank, while the home seller will receive one from the real estate agent who handled the sale.

All loans are accompanied by closing statements, though they vary in complexity.

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. If you are the seller, you’ll receive a similar Closing Disclosure that reflects your information along with your rights and obligations as the seller.

The Mortgage Closing Statement

Reading and accepting the final Closing Disclosure is one of the last steps that a borrower must take before signing on the dotted line and accepting the money for a mortgage or refinancing.

The final Closing Disclosure is preceded by the loan estimate, which estimates the various fees and additional charges that the borrower will face at closing. The final Closing Disclosure should not vary significantly from the initial loan estimate. The loan estimate should be received within three days of submitting the loan application.

The final Closing Disclosure must be given to the borrower at least three business days before closing. It contains a detailed list of every fee and charge that the borrower will be required to 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 will even present all of those figures side by side with the initial loan estimate for easy comparison. It also will include the details of the loan, including the interest rate, the amount of the monthly payments, and the payment schedule.

It’s important to carefully review the mortgage closing statement, to ensure that everything is correct and to check for any discrepancies.

Other Loan Closing Statements

Virtually any other type of loan comes with its own closing statement. This document may also be called a settlement sheet or credit agreement.

In a revolving credit loan, such as a new credit card or a bank line of credit, the closing details are usually reported in the credit application, with the borrower’s signature indicating agreement in advance to the lending terms. A more complex document is commonly used for personal loans that involve a large lump sum, with or without collateral.

If you’re getting a reverse mortgage, you wouldn’t get the standard Closing Disclosure. Instead, you would receive a HUD-1 Settlement Statement and a Truth in Lending Disclosure form. If you’re applying for a home equity line of credit (HELOC), you may receive a Truth in Lending Disclosure form but not a HUD-1 Settlement Statement or a Closing Disclosure.

The Truth in Lending Disclosure provides important information about the cost of credit, including your 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 title company selected to close the transaction. This will list all of the commissions and fees to be paid, as well as any credits that will be offset against them. The bottom-line figure is how much the seller will receive once the transaction is finalized. The Consumer Financial Protection Bureau requires that the seller receive this statement.

If you’re selling a home at a profit, you’ll need the closing statement to record the details of the sale when you file your taxes.

Components of a Closing Statement

The closing statement includes information related to the cost of buying or selling a home. The form can also include details of the property itself. What’s included on your closing statement can depend on whether you’re the buyer or the seller.

Generally, closing statements can include these components:

This same information is also reported on the Closing Disclosure if your loan requires you to receive one.

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. These statements look similar, though there are some slight differences in the information that’s reported. Below is an example of what the seller closing statement looks like. The buyer closing statement can be downloaded on the ALTA website, along with the seller statement.

ALTA Seller Closing Statement.