Blog > Settlement Statement vs. Closing Disclosure
By Ashley Melton, Realtor®
Introduction
Whether you're the buyer or the seller, the final part of most real estate journeys is the home closing process. And one important aspect of closing is the settlement statement... or is it the closing disclosure? These two terms can sometimes make things more confusing than they have to be, so today I'll be clearing up the confusion to help make your closing that much easier.
Definition of a Settlement Statement
A settlement statement is an itemized list of fees and credits involved in the entire real estate transaction. This document is a detailed account of what funds like real estate agent commissions, taxes, etc. are owed by the seller.
Of particular interest to the seller is the final entry of the statement which shows the net proceeds they'll receive and what the buyer owes.
What's in a Settlement Statement
The settlement statement contains a number of sections that provide comprehensive information to the seller about what to expect at closing.
- Debits vs. Credits
- Financial
- Prorations / Adjustments
- Loan Charges to Lender
- Application Fee
- Origination Fee
- Underwriting Fee
- Mortgage Insurance Premium
- Prepaid Interest
- Appraisal Fee
- Credit Report Fee
- Impounds
- Aggregate Adjustment
- Title Charges and Escrow Settlement Charges
- Owner’s Title Insurance
- Loan Policy of Title Insurance
- Title Search Fee
- Insurance Binder
- Escrow/ Settlement fee
- Notary Fee
- Signing Fee
- Commission
- Government Recording Transfer Charges
- Payoffs
- Miscellaneous
- Subtotals / Totals
Definition of a Closing Disclosure
The Closing Disclosure is specifically for the home buyer to understand what they'll owe at closing. This includes taxes, fees, etc. The buyer's lender will prepare the closing disclosure based on the estimated settlement statement provided by the closing agent. If the numbers on the closing disclosure and settlement statement don't match, it's an indication that there are issues that will require further review.
The home seller does not receive a copy of the closing disclosure but both buyer and seller still receive settlement statements that summarize costs and payouts.
What's In a Closing Disclosure?
The closing disclosure also contains quite a few sections to review so the buyer understands exactly what terms the loan entails and what credits, debits and fees will be incurred.
- Loan Term
- Loan amount
- Interest rate
- Monthly principal and interest
- Prepayment penalty
- Balloon payment:
- Projected Payments
- Payment calculation
- Estimated total monthly payment
- Costs at Closing
- Loan Costs
- Origination fee
- Mortgage points
- Application fee
- Underwriting fee
- Services borrower did not shop for
- Services borrower did shop for
- Other Costs
- Taxes and other government fees
- Prepaids
- Initial escrow payment at closing
- Cash to Close
- Summaries of Transactions
- Loan Disclosures
- Assumption
- Demand feature
- Late payment
- Negative amortization
- Partial payments
- Security interest
- Escrow account
- Loan Calculations
- Other Disclosures
- Contact Info and Confirm Receipt
In Conclusion
It’s important to review all paperwork involved in your home transaction carefully and this info alone is a great example of the confusion that can arise when trying to navigate the home buying and selling process. If you’d like even more detail about this topic, including explanations for each category and what the “Know Before You Owe” Rule is, read my full article, “What's the difference between a closing disclosure and a settlement statement?”
By Ashley Melton, Realtor®