A settlement statement is the final breakdown of all costs, credits, and fees in a real estate transaction. Also known as a closing statement, it shows how much a buyer owes, how much the seller receives, and where every dollar goes. In a refinance, it itemizes the borrower’s costs and loan payoff.
Today, the official form most buyers receive is the Closing Disclosure (CD), introduced in 2015. Still, many professionals and clients use “settlement statement” and “closing statement” interchangeably.
Settlement Statement vs. Closing Disclosure vs. HUD-1
The terms are often used interchangeably, but they refer to different documents depending on the transaction and time period:
Closing Disclosure (CD)
This is the modern, federally required form for financed purchases. It’s five pages long and must be delivered to the buyer at least three business days before closing. The CD is designed for transparency: it clearly shows loan terms, projected monthly payments, closing costs, and the “cash to close” figure.
Buyers should compare it against their initial Loan Estimate to confirm that fees and rates haven’t changed unexpectedly, especially when applying for conventional loans in California. The three-day review period is a legal protection, giving you time to catch errors or ask questions before signing.
Settlement Statement (ALTA form)
Escrow or title companies usually prepare an ALTA Settlement Statement, developed by the American Land Title Association. Unlike the borrower-only CD, the ALTA form shows side-by-side details for both buyer and seller. It’s often easier to read because it lines up credits and debits, showing exactly how the money flows.
While not required by law, it’s widely used because it helps both parties see the full picture and confirm that the transaction balances to the penny. Sellers, who don’t receive a CD, rely on this form to understand their net proceeds.
HUD-1 Settlement Statement
Before October 2015, the HUD-1 was the industry standard for nearly all mortgage transactions. It itemized every fee and was provided at least one day before closing. After the CFPB’s TRID (“Know Before You Owe”) rule, the HUD-1 was replaced with the Closing Disclosure to reduce confusion.
However, the HUD-1 is still used in certain situations, such as reverse mortgages, HELOCs, or all-cash transactions, where the CD isn’t required. Many professionals (and even clients) still use “HUD-1” as shorthand when referring to settlement documents, which is why the terminology lingers today.
Bottom line: A settlement statement and closing statement are the same concept. The Closing Disclosure is the federally required version for borrowers.
What’s Included in a Real Estate Settlement Statement?
A settlement statement is essentially a detailed receipt. Common sections include:
- Purchase Price & Loan Amount – Sale price, loan proceeds, and down payment.
- Buyer’s Debits & Credits – Loan amount, deposit, seller credits, plus debits like taxes, insurance, and loan fees.
- Seller’s Debits & Credits – Agent commissions, mortgage payoff, transfer taxes, and net proceeds.
- Loan Fees – Origination, underwriting, discount points, appraisal, and PMI.
- Title & Escrow Charges – Title insurance, escrow settlement fee, notary, and recording fees.
- Taxes & Prorations – Property taxes, HOA dues, and transfer taxes allocated between buyer and seller.
- Insurance & Prepaids – Homeowner’s insurance, escrow reserves, and prepaid interest.
At the bottom, the buyer sees Cash to Close, and the seller sees Net Proceeds.
When Do You Get the Final Settlement Statement?
The timing of when you receive your settlement documents is tightly regulated for buyers, but also influenced by local escrow practices:
1. Closing Disclosure
Federal law requires lenders to provide the CD at least three business days before closing. This rule, created under the CFPB’s “Know Before You Owe” regulations, is designed to protect consumers.
The review period gives buyers time to study the fees, compare the CD against their Loan Estimate, and ask questions. If major changes occur, such as a new loan product or an APR increase above tolerance limits, a new CD must be issued, and the three-day period begins again.
2. Final Settlement Statement
The escrow or title company issues the ALTA settlement statement at or just before closing. Unlike the CD, which is borrower-focused, the ALTA statement shows the complete financial picture for both buyer and seller.
It confirms the final numbers, including prorated taxes, escrow adjustments, and last-minute fee changes. Sellers rely on this statement to understand their net proceeds, since they do not receive a CD.
3. Preliminary Version
A few days before closing, escrow often provides an estimated settlement statement or “prelim.” This version is not final, but it gives both sides a preview of the expected cash needed to close or the net proceeds.
It allows buyers to arrange their wire transfers or cashier’s checks and gives sellers an early idea of their bottom line. Adjustments such as updated tax prorations or corrected payoff amounts may still occur before the final version is issued.
4. Day of Closing
On signing day, the final ALTA settlement statement and the CD (for buyers) should match. Buyers and sellers sign to confirm they have reviewed and agree with the figures.
Once the documents are signed, the lender funds the loan, the escrow disbursements are made according to the statement, and the transaction is officially closed when the deed is recorded.
Why this matters: Having both the CD in advance and the ALTA statement at closing ensures accuracy and transparency. Buyers can double-check their “cash to close,” and sellers can confirm their “cash to seller.” This process reduces the chance of surprises on closing day.
California & Los Angeles Specifics
In California, escrow companies usually handle closings. Expect these regional practices:
- Escrow & Title: In Southern California, sellers often pay for the owner’s title policy, while buyers cover the lender’s policy. Escrow fees are typically split 50/50.
- Transfer Taxes: Los Angeles County charges $1.10 per $1,000, and the City of Los Angeles adds $4.50 per $1,000. On an $800,000 home, that’s about $4,480 in taxes.
- Property Tax Calendar: Taxes are paid in two installments (November 1 and February 1). Escrow prorates these payments so that each party pays its share.
- Closing Costs: Buyers should budget 2–5% of the purchase price for closing costs. On an $800,000 home in L.A., this could mean $16,000 to $40,000.
- Local Fees: Expect line items for city-required retrofits, Natural Hazard Disclosure reports, or HOA transfer fees.
For official resources: See the California Department of Real Estate and the Los Angeles County Assessor.
Settlement Statements for Refinances
If you refinance your mortgage, you will also receive a detailed statement that outlines how the new loan replaces the old one and where every dollar goes. While the structure looks similar to a purchase, some of the line items differ because there is no seller involved.
- Loan Payoff: Shows the full payoff of your old mortgage, including accrued interest.
- Cash to Close or Cash Out: Indicates whether you owe funds or will receive money back.
- Closing Costs: Similar to a purchase—lender fees, appraisal, title, and escrow—but no agent commissions.
- Escrow & Prepaids: May include new escrow deposits for taxes and insurance.
- Right to Cancel: Most refinance loans include a 3-day rescission period before funding.
Reviewing your refinance statement ensures your old loan is fully paid off and that the new terms are correct.
Real Estate Settlement Statement Example
Understanding the theory is helpful, but seeing how the numbers actually come together makes it much clearer. Below is a simplified example of a Los Angeles home purchase that shows how debits, credits, and adjustments appear on a settlement statement.
- Scenario: $800,000 Los Angeles purchase with 20% down.
- Price & Credits: $800,000 debit to buyer/credit to seller. Buyer credits: $640,000 loan, $24,000 deposit, $10,000 seller credit.
- Prorated Taxes: Seller owes buyer ~$4,375 for taxes already accrued but unpaid.
- Closing Costs: Buyer’s costs = $15,000. Seller pays ~$44,000 commission, ~$4,480 in transfer taxes, and other fees.
- Cash to Close: Buyer owes about $131,000. Seller nets roughly $735,000 before paying off their mortgage.
This walk-through shows how settlement statements balance all sides. For a real-world template, see the CFPB’s sample Closing Disclosure.
Final Notes on Settlement Statements
A settlement statement, whether you hear it called a closing statement, HUD-1, or Closing Disclosure, is one of the most important documents in your real estate journey. It lays out every cost and credit so buyers and sellers know exactly where their money is going.
In California, and especially in Los Angeles, you will see some unique line items such as transfer taxes, prorated property taxes, and escrow fee splits. If you are refinancing, the structure is similar but without commissions on the seller’s side.
The best advice is simple: review your statement carefully, compare it with your Loan Estimate, and ask questions about anything that feels unclear. With the right preparation and guidance from professionals like ID Mortgage Broker, you can approach closing day confident and fully informed, whether your goal is to buy, refinance, or lower your mortgage payments in California.
