Closing Statements Explained
What is the difference between a HUD1, ALTA, and a Closing Disclosure (“CD”)? All these forms provide basically the same information for closings and all are closing statements or settlement statements. The forms provide all fees, payoffs, and credits involved with a real estate closing. The forms have changed over the years.
Up until 2010, most everyone used the Closing Statement form provided by Housing and Urban Development (“HUD”), which was the HUD1 form. The HUD1 was created in the 1970’s and is still used today for many cash purchases and some commercial closings. It is usually two pages. The first page will show the purchase price, payoffs, and any credits between the buyer and seller. The bottom of the first page will also provide the net amount due from the buyer and the net amount due to the seller. The second page will show any real estate commission and closing fees paid by buyer and seller.
In 2010, HUD released a new HUD1 GFE form that added a 3rd page that provided a comparison of the fees disclosed on the good faith estimate and what is actually being charged at closing. This form was developed to help limit last-minute changes in fees. The HUD1 GFE form limits the amount certain fees can change from the good faith estimate to the final closing statement. If certain fees were added at closing that were not disclosed on the good faith estimate, the lender would often have to pay those additional costs. FHA still requires reverse mortgage closings use a HUD1 GFE form for closing.
Five years later, the CFPB changed the closing statement again to the Closing Disclosure (“CD”). Residential mortgage lenders are required to use this form for home mortgage loans. The CD is five pages and provides a lot more loan information than any previous form. The first page will have the loan amount, interest rate, monthly payment, and total amount due from the borrower. The second page will have all the costs, similar to a HUD1 form. The third page will have the purchase price, loan amount, and all credits between the buyer and seller. The fourth page will disclose many terms of the loan and the amounts used to set up an escrow account for taxes and insurance. The fifth page will disclose more loan terms, including the total payment if the loan is kept for the full term and finance charges over the life of the loan. The bottom of page 5 will have contact information for everyone involved in the transaction who is not a buyer or seller.
The CD is used for both purchases and refinances. For refinances, page 3 may be simply a list of payoffs instead of the page 3 used for purchases. The CD provides a lot of non-public information regarding the loan. For that reason, an American Land Title Association (ALTA) settlement statement is often provided along with the CD. An ALTA statement is generated for most purchases involving a lender. It can also be used for cash purchases without a lender. The form is usually one or two pages and includes all the amounts involved in the transaction, but omits any non-public loan information like the interest rate and monthly mortgage payments. The ALTA statement has a column for the Seller, Buyer, and then a description of the cost or fee in the middle. The seller and buyer columns have both a credit and debit column. The ALTA will list all debits and credits for both parties. At the end of the form, each column will have a subtotal and the amount due from the buyer/borrower and the amount due to the seller. (Although there are some instances where a seller must also send funds for closing). Some closing attorneys will also provide a seller CD that only discloses the seller-side of the transaction. When providing a closing statement to real estate agents, utility companies, or a municipality to show proof of the sale, it is best to provide the ALTA statement instead of the CD.
John C. Bennett is a real estate closing attorney and owner of Origin Title and Escrow, Inc.. Since 2003, Origin Title has handled real estate transactions – purchases, refinances, reverse mortgages – quickly and professionally. There will be no surprises, nothing misunderstood. Title searches are thorough and well-reasoned, to avoid unpleasant surprises later down the road. Calculate your closing costs in Georgia or Florida using our calculator or contact Origin Title using this form.