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- The Secret About Prescriptive Easement: Top Guide 1 Must Know - December 4, 2023
- About Home Equity Loans In Texas And How Can One Obtain It - November 27, 2023
Introduction to Closing Statement
In a real estate purchase, the buyer and seller have a bunch of documents to sign. Out of all the documents, there is one document that holds special importance.
It’s called a Closing Statement or a Closing Disclosure. In this post, we will learn what is a closing statement and its significance.
What is a Mortgage Closing Statement?
Once you are finally made it to the end of closing on a home purchase or a refinance after going through the underwriting process and getting clear to close from the lender.
A closing statement is a twin to the loan estimate which compares to what was disclosed in the loan estimate versus what it is at the end.
Usually, the real estate closing statement fees are lower than what was disclosed in the loan estimate because you were over-disclosed in a loan estimate initially.
The house closing statement is also known as the settlement statement that you are going to sign during closing.
You might have received a closing statement electronically three days before your closing.
Back in 2015, the closing statement was replaced by the HUD-1 statement. Just like Good Faith estimate and truth in lending combined was replaced by loan estimate, similarly, the HUD-1 is now known as the closing statement or closing disclosure.
What is Included in a Mortgage Closing Statement?
The closing statement will include the following details.
I - Closing Information:
On the first section of the closing statement, you will have dates, like the date issued, the closing date, and the disbursement date.
Usually, in most states, the disbursement date and the closing date are the same. Along with that, you have Settlement agent information with the name of the title company with the file number associated with the property in question.
You will also see the property address and the sales price of the subject property under this section.
II - Transaction information:
In this section, you will have borrower details including the name of the borrower and the address.
The second piece of information would be the seller’s name and address. And the final information under this section would be the name of the lender who is providing the mortgage.
III - Loan Information:
In this section, the first thing that would be mentioned is the loan term, whether the loan is for 30, 20, 15, or 10 years.
The next information is the purpose of the mortgage, whether it is a purchase transaction or refinance.
The third information under this section is whether the interest rate is fixed or variable. The fourth information would be the loan type, whether it is a conventional, FHA, VA, or any other loan type, following with the loan number and the MIC number which is from the Mortgage Electronic Registration System.
IV - Loan Terms:
The next thing the statement is going to show is the loan amount, interest rate, monthly mortgage payments, prepayment penalties, and balloon payment if applicable. All these details are mentioned under the loan terms section.
V - Projected Payments:
This section will tell the bifurcation of your monthly mortgage payment concerning amounts like Principal and interest, mortgage insurance (If any), estimated escrow, and your total monthly payment.
You will also find the estimated property taxes and homeowners insurance amount every month under this section showing which components are included in your escrows.
VI - Closing Costs:
This section shows the total amount of closing costs and the cash to close required to complete the transaction.
The rest of the closing statement will include all the charges and costs in detail like Origination charges, points, appraisal fees, credit report fees, Flood Cert. fees, tax service, processing fees, title charges, recording charges, Prepaids, and others.
This section will also inform what fees are to be paid at closing and what are to be paid before closing.
The closing statement will also have all the contact information about the lender, mortgage broker, real estate agent, and the settlement company so that you can contact them in case you require any documents from them.
Why is a Closing Statement Important?
The real estate closing statement will give all the details about your mortgage; hence you must keep a copy of this statement for your future reference.
The closing statement is also important when you are filing your taxes, if you have bought a home there are some parts of the closing costs that you can write off.
When you are filing your taxes for that specific year, your CPA will ask if you have any added mortgage obligations, if you have purchased a home or refinanced, then you can send the house closing statement to your CPA so that you can get benefit from the same.
Conclusion
All the lenders will provide the closing statement to their borrowers. It is a standard form that is used for residential loans which is a five-page document.
This statement goes by a few names like closing or settlement statement, or closing disclosure.
Every lender might throw different stuff here and there on the statement, however, this is the consistent form used by all lenders across.
