Closing (settlement) is where the deal is finalized: money changes hands, the deed is delivered, and costs are allocated between buyer and seller through prorations.
Closing concepts
- Escrow
- A neutral third party holds funds and documents until conditions are met.
- Proration
- Dividing ongoing costs (taxes, HOA dues) fairly between buyer and seller as of the closing date.
- Credit vs. debit
- On the settlement statement, a credit is money owed to a party; a debit is money owed by them.
- Closing Disclosure (CD)
- A federally required form detailing final loan terms and costs, delivered at least 3 business days before closing.
Who typically pays
- Seller: owner's title work, deed prep, payoff of existing liens, prorated taxes up to closing.
- Buyer: loan costs, lender's title insurance, prepaid interest and escrows, recording the deed.
- Shared/negotiable: transfer taxes (varies by jurisdiction and contract).
RESPA governs settlement on most residential loans and requires the Loan Estimate and Closing Disclosure. The 3-day rule before closing is a frequent exam point.