What Does a Closing Statement Look Like?

A closing statement in a real estate transaction provides a comprehensive overview of all financial aspects involved in the property transfer. In most residential real estate transactions in the United States, this document is formally known as the Closing Disclosure. It serves to clearly detail all costs, fees, and financial obligations for both the buyer and the seller, aiming to provide transparency and prevent unexpected charges at the time of closing. Understanding this document is important for anyone buying or selling a home, as it consolidates the final financial terms.

The Closing Disclosure Form

The Closing Disclosure (CD) is a standardized, multi-page form, typically five pages in length, designed to clarify the financial details of a real estate transaction. The mortgage lender is responsible for providing this document to the borrower. Federal regulations require that the lender deliver the Closing Disclosure to the borrower at least three business days before the scheduled closing date. This three-day period allows the borrower sufficient time to review the document thoroughly and compare it against the initial Loan Estimate they received earlier in the process.

This standardized form was mandated by the Consumer Financial Protection Bureau (CFPB) and came into effect in October 2015. It replaced previous forms such as the HUD-1 Settlement Statement and the final Truth-in-Lending disclosure for most mortgage loans. Its function is to provide a transparent breakdown of all costs associated with the mortgage loan and the real estate transaction. Its multi-page layout organizes financial components into distinct sections for easier comprehension.

Breakdown of Key Sections

The Closing Disclosure provides a structured presentation of financial information, beginning with the specific terms of the loan. The initial page outlines the loan amount, the interest rate, and the monthly principal and interest payment, also indicating whether these figures could change over the loan’s duration. This section also specifies if the loan includes a prepayment penalty for early payoff or a balloon payment, which is a single, large payment due at the end of the loan term.

The Projected Payments section details the estimated total monthly payment over the life of the loan. This breakdown typically includes the monthly principal and interest, any applicable mortgage insurance premiums, and estimated amounts for escrow. Escrow payments usually cover property taxes and homeowners insurance, which are collected by the lender and paid on the borrower’s behalf.

The second page itemizes the Costs at Closing, categorizing them by what the borrower pays. Loan Costs include charges directly related to obtaining the mortgage, such as origination charges, which might encompass application, underwriting fees, or discount points paid to lower the interest rate. This page also separates “Services Borrower Did Not Shop For,” like appraisal fees or credit report charges, from “Services Borrower Did Shop For,” which could include title search fees or pest inspection costs.

The “Other Costs” section covers additional expenses. These often include taxes and other government fees, such as recording fees or transfer taxes. This section also details prepaids, which are amounts paid in advance for items like homeowners insurance premiums or prepaid interest, and the initial escrow payment required to establish the escrow account. Other miscellaneous fees, such as Homeowners Association (HOA) dues or home inspection fees, are also itemized here.

Understanding the Financial Summary

The final pages consolidate financial information, summarizing the transaction’s outcome for both borrower and seller. The “Summaries of Transactions” section presents a detailed accounting of debits and credits for each party involved. While the buyer receives a five-page Closing Disclosure, the seller typically receives a separate, shorter version that focuses specifically on their financial obligations and proceeds.

The “Cash to Close” calculation for the borrower shows the exact amount of funds needed to finalize the purchase. This figure is derived by combining the total loan amount with all closing costs and then adjusting for any credits or earnest money deposits already made. The calculation generally subtracts earnest money deposits and seller credits from the sum of the down payment and total closing costs.

For the seller, the document outlines the “Cash From/To Seller,” representing the net amount they will receive or pay at closing after all adjustments. This includes the sale price, minus any seller-paid closing costs, real estate commissions, and prorated expenses. Adjustments and credits are applied to both parties’ final amounts, such as earnest money deposits (reducing buyer’s cash needed) and seller credits (offsetting buyer’s closing costs). Prorations for property taxes or HOA dues are also factored into these final summaries.