There are a number of different ways to finance a real estate purchase. Some buyers are able to pay cash, but many work with financial institutions to obtain the funds to buy the property. Even when working with a lender, there are multiple options available for financing. While those decisions are outside the scope of this discussion, each type of financing does have implications for closing.
Depending on how the buyer is financing the transaction, there will be particular statements or documents related to the financing that must be signed. In this article, we will walk through a few of the variations and what is involved with each one.
At a high level, the settlement statement is a document reflecting all the ways that money will change hands between parties at closing.
More specifically, however, it is an itemized list of all the costs, fees, and payouts based on how the transaction has been financed and what has been required by the closing process. The kinds of costs detailed on the settlement statement will include:
Settlement statements will typically be prepared by the escrow officer or attorney and are sent out just before closing. This is an important document that should be carefully reviewed prior to closing.
A closing disclosure (CD) is a document given specifically to buyers who are working with a lender to finance a transaction. The CD provides all the relevant information regarding the buyer’s loan. It is provided by the lender and typically includes, but is not limited to:
Until 2015, the buyer received a HUD-1 in all transactions alongside a Truth in Lending Disclosure. The HUD-1 was replaced for most transactions in 2015 with the CD.
HUD-1s are still in use, but in specific situations only. HUD-1s are used in conjunction with reverse mortgages, line of credit loans, residential properties being purchased with commercial loans, and by lenders who do a certain number of loans a year.
The HUD-1 acts much as the CD, providing all the terms, fees, and costs associated with the loan.
The information provided in Peak Title Professionals, does not, and is not intended to, constitute legal advice. All content is for general informational purposes only and is not intended to provide a complete description of the subject matter. Specific processes will vary based on applicable law. The title and closing process will be handled by a third-party attorney to the extent required by law. Product offerings vary by jurisdiction and are not available or solicited in any state where we are not licensed.
