Understanding Closing Statements

You found the home of your dreams and with closing date fast approaching that means paper work time! Before signing by the “X” it is important to be familiar with what you are signing. Here is a breakdown of a settlement statement.

A U.S. Department of Housing and Urban Development (HUD) statement, also known as the settlement or closing statement, is a financial overview of all transactions. It is used by the closing agent to itemize all charges to the borrower (buyer) and the seller during the process.

Section J, Summary of Borrower’s (Buyer’s) Transaction – In Section J, you will find a breakdown of the gross sales price of the property and amounts owed by the buyer.

You will also find entries for funds the buyer will receive at closing such as credits for the amount of earnest money paid, amount of the new loan and miscellaneous items paid by or on behalf of the buyer. Bills that the seller has not yet paid but owes all or a portion of such as real estate taxes will be shown in this section. The total of all items is then added to the buyer’s proceeds.

A summary of the total amount due to the buyer and items paid by or for the buyer is also highlighted in Section J. The bottom line shows how much money the buyer must bring to a closing – a negative number means that the buyer will receive money back at the closing.

Section L, Settlement Charges – The numbers in this section, found on Page 2, are totaled before being brought forward to Page 1. The individual areas under Section L deal with commissions paid to agents, loan fees (which are most often paid from buyer’s funds), charges that the seller requires, escrow funds, title fees, charges such as costs for recording deeds, mortgages and fees for tax stamps, and survey fees and inspections for things such as pests, home warranty, etc.

During the entire home-buying process be sure to be very clear during contract negotiations as to who is going to be paying for what costs, because what is written on the contract is what will be finalized on the settlement statement.

And always, be sure to ask your us if you ever have any questions.
Dana M. Garrett - 937-645-6545 - Dana.Garrett@RealLiving.com
Nanie Ingram – 937-645-6542 – Nanie.Ingram@RealLiving.com