When you’re preparing to close on a home, whether you're buying or selling, you’ll encounter a crucial document known as the Closing Disclosure (also called a Settlement Statement). This final paperwork outlines all the financial details of the real estate transaction and includes a breakdown of costs for both parties. Whether you're a first-time buyer or a seasoned seller, understanding your Closing Disclosure is key to ensuring a smooth and successful closing process.

What’s Included in a Closing Disclosure?

The Closing Disclosure isn’t just for buyers—it’s essential for sellers as well! Here's what you can expect to find in this important document:

Loan Terms (For Buyers): This section outlines the loan amount, interest rate, and repayment schedule. As a buyer, it’s important to fully understand your financial commitment, including how much you’ll be paying over the life of the loan.

Closing Costs (For Buyers and Sellers): Both buyers and sellers will face closing costs, but they vary for each party. The Closing Disclosure provides a detailed list of these fees, which may include:

• Appraisal Fees: For buyers, this covers the cost of getting the property appraised.
  
  

• Title Insurance: Protects the buyer and lender in case of title issues.
  
  

• Attorney Fees: If you’re using a lawyer for the transaction.
  
  

• Seller's Transfer Taxes: Sellers may need to pay taxes related to transferring the property title.
  
  

• Real Estate Commissions: These are typically paid by the seller but are important to review.

Cash to Close (For Buyers): This section will detail the amount of money a buyer needs to bring to the closing table to cover the down payment and closing costs.

Seller Credits (For Buyers and Sellers): If the seller has agreed to offer concessions or credits, such as covering part of the buyer's closing costs, these will be listed here. Sellers should check for these credits, as they could reduce the buyer's overall costs.

Proceeds to Seller (For Sellers): This section will outline the final amount the seller will walk away with after all fees, including commissions and other closing costs, are deducted from the sale price.

Why the Closing Disclosure Matters for Both Buyers and Sellers

For both buyers and sellers, the Closing Disclosure is crucial as it serves as the final confirmation of all terms and conditions agreed upon during the transaction. It helps everyone involved understand their financial responsibilities and ensures there are no surprises at the closing table.

Reviewing Your Closing Disclosure: A Crucial Step for Both Parties

Before you sign the Closing Disclosure, take the time to carefully review the document for accuracy. This step is important for both buyers and sellers to make sure that all terms are correct and in line with what was previously discussed.

For Buyers: Double-check the loan amount, interest rate, and cash to close. Ensure the closing costs listed match the loan estimate you received earlier in the process.

For Sellers: Review the seller credits and the final proceeds. Be sure that all costs, including commissions and taxes, are accounted for, and that the net proceeds reflect what you expected.

Both parties typically receive the Closing Disclosure 3 days before closing, which provides ample time to review it thoroughly. This is your opportunity to catch any errors or discrepancies before the big day.

Red Flags to Watch Out For

As you review your Closing Disclosure, keep an eye out for:

• Unexpected Increases in Closing Costs: If you notice that your costs are higher than expected, whether you’re buying or selling, don’t hesitate to ask for clarification.
  
  

• Discrepancies Between the Loan Estimate and Closing Disclosure: If the terms or fees differ from what you were initially quoted, it’s important to address this well before closing.
  

Both buyers and sellers should feel empowered to question anything that seems out of place—communication is key to ensuring a smooth closing process.

Closing Disclosure: A Step Toward a Smooth Closing

Understanding the Closing Disclosure helps you avoid confusion and ensure that you’re financially prepared for what’s ahead, whether you're buying or selling. This document allows you to make informed decisions and ensures the homebuying or selling experience is as stress-free as possible.

Disclaimer: This information is for general knowledge and informational purposes only and does not constitute financial, tax, or legal advice. We are not lawyers, financial advisors, accountants, loan officers, or mortgage brokers. Please consult with a qualified professional to understand your specific needs.