The signed accounting of a loan closing: sources and uses of funds, prorations, escrows, and every fee and charge, agreed line by line before funding.
The longer version
A closing statement, often called a settlement statement, is the accounting of every dollar that moves at closing. It shows where the money comes from and where it goes: loan proceeds and equity on one side, payoffs, fees, reserves and disbursements on the other. Nothing funds until the lender and borrower have approved it.
In commercial lending it is prepared by the title or escrow company and usually follows the ALTA settlement statement form. Typical lines include the existing loan payoff, title premiums and endorsements, recording fees and transfer taxes, lender fees and legal fees, initial deposits into tax, insurance and replacement reserves, any holdbacks, prorations of taxes and rents, and the net amount wired to the borrower or seller. Residential loans use a different, federally prescribed form, which is why the two look nothing alike.
The statement is where a closing's loose ends become visible. A reserve sized differently from the loan agreement, a payoff that has gone stale, a fee nobody agreed, a proration on the wrong date. Each one is cheaper to fix on the draft than after the wire.
The approved, signed version belongs in the closing binder. It is the document a servicer uses to confirm opening reserve balances and the one an auditor uses to trace funding.
In Prodeal
In Prodeal it is a checklist line with a status, a due date, and a responsible party. The executed version lands in the deal's document set and carries into the closing binder.
Common questions
- What is a closing statement in real estate?
- The accounting of all funds at closing, showing sources such as loan proceeds and equity, and uses such as payoffs, fees, reserves and disbursements. It is prepared by the title or escrow company and approved by the parties before funding.
- What does a closing statement look like?
- A line-item ledger with debit and credit columns for each party. A commercial statement usually lists the loan amount, payoffs, title and recording charges, lender and legal fees, reserve deposits, prorations and the net funds disbursed, totaling to the wire amounts.
- Who prepares the closing statement?
- The title or escrow company handling the closing, working from the lender's closing instructions, the payoff letters and the fee invoices. The lender and borrower review drafts and sign the final version before funds are released.
- What is the difference between a closing statement and a closing disclosure?
- A closing disclosure is the federally required form for most residential mortgage loans. Commercial loans are not subject to it and use a settlement statement, often on the ALTA form, which is more flexible and shows the deal's actual sources and uses.