Settlement statements summarize the terms and conditions of a settlement agreement.
A settlement statement details all the costs owed by or credits due to the buyer or seller, as well as the terms and conditions of the loan. Additionally, it details any fees a borrower must pay in addition to the interest on a loan. Settlement statement documentation requirements vary depending on the type of loan. Often referred to as closing statements, mortgage loan settlement statements are used in real estate transactions.
A settlement statement is a standard form used at nearly all home loan closings. The closing costs and charges are listed, as well as how the loan proceeds will be distributed. In some cases, it is simply called the “HUD-1”.
The HUD-1 Settlement Statement lists all charges and credits to the buyer and seller in a real estate settlement or mortgage refinance.
You receive a HUD-1 if you applied for a mortgage before October 3, 2015, or if you are applying for a reverse mortgage. Settlement agents can use the shortened HUD-1A form in transactions without a seller, such as refinance loans.
In most cases, you receive a Closing Disclosure instead of a HUD-1 if you applied for a mortgage after October 3, 2015.
How Long Will It Take for Me to Receive My Settlement Statement?
Settlement statements are presented at loan closing. A copy of the completed settlement statement must be provided to you on the business day immediately before the loan closing.
Before the loan closing, ask to see a copy of the settlement statement or HUD-1. During this time, you can ask the lender or broker questions about charges and fees as well as the disbursement of loan proceeds. Ensure you are fully aware of all the details and that the lender is not overcharging you.
What Should I Look for in a Settlement Statement?
Make sure you are not being overcharged in the settlement statement. You should compare the fees listed in the settlement statement with the estimates of the fees disclosed in the Good Faith Estimate. You should question these fees if there are significant differences in the numbers or if any of the numbers in the settlement statement are higher.
It is important to review all proposed loan payoffs and other payments being made from loan proceeds to ensure that the existing credit being paid off is what you expected, what you owe, and what you agreed to. Make sure all of the information on the settlement statement is accurate. Anything that seems out of place should be questioned.
To conclude, make sure all debts you want to be paid off are paid off and that you will receive the money you expect.
Trust Accounts and Settlement Funds
A settlement fund falls into this category of funds that require special handling. Your law firm’s trust account receives settlement funds directly and pays them to the parties of the settlement.
A settlement check is never deposited directly into your firm’s operating account. Putting money into a trust account serves as a notice to the world that this money is not for your regular business operations.
Does the Seller Get a Closing Statement?
Most of the paperwork is signed by the buyer at closing, so some sellers wonder if they will receive a settlement statement at all.
However, all parties to the transaction should pay attention to this document. The settlement statement will be provided to both the buyer and seller at closing.
How Is the Settlement Statement Prepared?
The settlement statement will be prepared by whoever is facilitating the closing, whether it is a title company, an escrow company, or a real estate attorney.
How Is the Settlement Statement Now Referred to?
A settlement statement is just that: a settlement statement. States use different versions of these documents. ALTA (American Land Title Association) developed real estate settlement forms that are widely used across the country.
The settlement statement you’ll receive is not a HUD-1. Since October 3, 2015, the Closing Disclosure has replaced the HUD-1 Settlement Statement and Truth-in-Lending Statement.
What Is the Difference Between a Settlement Statement and a Closing Statement?
The settlement statement is the same as the closing statement, though the term “settlement” is most commonly used by real estate professionals.
How Do Closing Disclosures and Settlement Statements Differ?
A Closing Disclosure contains almost the same information as a settlement statement, but it is specific to the borrower and their fees. It is issued by the buyer’s lender and is intended to be compared to the Loan Estimate, which is the first estimate of fees the buyer receives when borrowing money.
Lenders usually use a copy of the estimated settlement statement sent by the closing agent to prepare the Closing Disclosure. Something is wrong if the bottom line totals in the Closing Disclosure and settlement statement do not match.
Sellers do not typically receive a copy of the Closing Disclosure. In a cash transaction, there is no need for a Closing Disclosure since no one is borrowing money — however, the buyer and seller would still receive a settlement statement summarizing their costs and any payouts.
At Closing, What Is an “Excess Deposit?”
On the seller’s settlement statement, there is a line item called “Excess Deposit.”
What is an excess deposit, and who will get the money?
The excess deposit line represents any funds remaining after real estate agent commissions are deducted from the earnest money deposit.
A buyer puts down an earnest money deposit of $7,000 on a $100,000 home. At closing, both the listing agent and buyer’s agent are owed 3% of the sale price ($6,000). There will be $1,000 in “excess deposit” that will be returned to the seller.
When Will I Receive a Settlement Statement for a Mortgage Loan?
If both parties agree to the settlement agreement, including all expenses and fees, the closing will be scheduled, and you will obtain your settlement statement. As part of the settlement process, your settlement agent will instruct you on how to deliver the money, and you will sign the closing documents and attend the closing.
What Is the Difference Between a Settlement Statement and a Closing Statement?
In real estate transactions, the settlement statement is commonly referred to as a closing statement.
Debt Settlement Statements: What Are They?
Debt settlement statements summarize the debts that have been purged, reduced, or otherwise amended after attorneys and debt settlement companies successfully negotiate debt settlements on behalf of borrowers with large amounts of debt.
Is it Necessary to Hire an Attorney?
Before closing the loan and purchasing the property, this is one of the final documents needed. If you haven’t consulted a mortgage attorney, having one do a final check of all your materials and papers is a good idea to ensure your interests are protected.
Use LegalMatch to find the right mortgage attorney for your needs today. You won’t want to go through a process as complex and detailed as a mortgage on your own. An attorney in your area can help you review all necessary documents and ensure the entire process goes smoothly.
