When you’re preparing to close on a home, you’ll receive some final documents that outline the loan terms, closing costs, and the exact amount each party must pay or receive. Two of the most important are the financial disclosure and the financial statement (also known as the ALTA financial statement, or HUD-1 in older trades).
Two formats often contain similar numbers that must match, but are not compatible. The Closing Disclosure is a lender-required document that explains the details of your mortgage loan and must be submitted at least three days before closing. A settlement statement, on the other hand, is a document prepared by the closing agent that sets out the final itemized costs of the transaction and is given to both the buyer and seller on the closing date.
Whether you’re closing in Boulder, Colorado, Memphis, Tennessee, or Providence, Rhode Island, understanding how these documents work together can help you catch errors early and avoid last-minute surprises.
What is a closing disclosure?
The Closing Disclosure is a five-page document required by the federal government that provides the final details of the mortgage to the borrower (the buyer taking out the mortgage). For consumer protection purposes, delivery must be made at least three business days prior to closing.
Who will receive the closing disclosure?
Only the borrower receives the closing disclosure. Seller will not receive this document.
What is the purpose of financial disclosure?
A summary of the final disclosures follows.
Final loan terms: Includes interest rate, loan amount, and any changes to terms since application. Estimated monthly mortgage payment: Shows principal, interest, mortgage insurance, and escrow details in your monthly budget. Closing costs and prepaid expenses: List all required prepayments, including taxes, home insurance, and interest. Cash needed for closing: The exact amount of money needed for closing to avoid any surprises. A detailed breakdown of loan fees, lender fees, and third-party fees: details where every dollar goes, from financing to appraisal and title costs.
The main role of the Closing Disclosure is to allow the borrower to know exactly how much they are paying and to compare the final figure to previous loan estimates.
Timing: 3 day rule
Federal law requires lenders to provide closing disclosures three business days before a buyer signs final loan documents. This gives the borrower time to review, ask questions, and flag any discrepancies.
What is a Settlement Statement (ALTA or HUD-1)?
A settlement statement, also known as an ALTA settlement statement, is a detailed breakdown of all financial items in a real estate transaction. Unlike a closing disclosure, this one explains both sides of the transaction.
Who is the recipient of the settlement document?
Both buyers and sellers receive their own versions of settlement statements. Redfin agents and lenders often receive copies as well.
What is the purpose of the settlement document?
The settlement memorandum contains the following information:
All Buyer and Seller Closing Costs: A comprehensive list of all transaction fees, from title to record, with details for each payer. Credits and prorations: Prorating property taxes, HOA dues, utilities, and seller concessions to ensure each party pays their fair share until closing. Taxes and insurance: Property taxes, transfer taxes, homeowner’s insurance, and down payment reserves collected by the lender. Agent commission: The total commission paid to the buyer and listing agent. Payoff: The exact amount required to pay off the seller’s existing mortgage, lien, or real estate-related obligations. All deposits and payments: Details of all down payments (such as earnest money) and how funds will be distributed after the deal closes, including seller proceeds.
Accuracy: Total must match final disclosure
Closing disclosures are based on the closing statement, so the buyer’s total amount, especially the cash to close and closing costs, must exactly match. If not, the closing agent will need to amend the document.
Main differences between financial disclosure and financial statements
To help you understand when each form appears and what it contains, we have outlined the key differences between financial disclosures and settlement statements below.
Features Closing Disclosure Settlement Statement Who will receive it? Borrower only Buyer and seller each get a version Purpose Final loan terms and borrower-specific costs Complete financial accounting for both parties Contents Loan details, payments, and costs for the borrower All transaction fees, credits, deposits, and fees Legal requirements? Yes, increase your mortgage Not required by the federal government, but standard practice Timing Must be received 3 days before closing Typically provided at or just before closing Does it have to match? Yes, it must match the settlement total CD Numerical Basis
Why are both documents important?
Although they play different roles, financial disclosure and financial reporting work together to ensure that:
Transparent and accurate accounting Protection for both buyers and sellers Compliance with federal consumer protection regulations Consistent final numbers
Financial statements are especially useful for tax preparation and record keeping for sellers who need proof of fees, commissions, and closing costs.
State-specific notes: California and other markets
Customs deadlines vary by state, so the exact document you receive and its creator may vary slightly depending on where you purchase.
escrow status
Location: California, Washington, Arizona, Nevada How it works: An escrow or title company oversees the closing and coordinates the financing. Buyer’s Documents: Closing Disclosure + Buyer’s ALTA Settlement Seller’s Documents: Seller-Specific ALTA Settlement
lawyer state
Location: New York, New Jersey, Massachusetts, Georgia, North Carolina, South Carolina How it works: A real estate attorney conducts or oversees the closing and reviews all documents. Buyer’s Documents: Closing Disclosure + ALTA Style Settlement Document (may include state-specific fees) Seller’s Documents: Seller’s ALTA Settlement Document with any supplements required by attorney
title company state
Location: Many states in the Midwest and South How it works: The title company leads the closing process and handles financing, recording, and disbursements. Buyer Documents: Closing Disclosure + ALTA Settlement Statement (format varies slightly by market) Seller Documents: Seller-specific ALTA Settlement Statement
Cash transactions (nationwide)
Location: All states How it works: Since no loans are involved, there is no lender oversight or closing disclosure. Buyer’s Documents: ALTA Settlement Statement (or HUD-1 as the case may be in certain markets) Seller’s Documents: Seller’s ALTA or HUD-1 Settlement Statement
When and how to receive these documents
Timing is critical in the closing process, so here’s a breakdown of when each document is expected to be filed.
Closing Disclosure: Sent by your lender via email, usually via a secure portal, three business days before closing. Settlement Statement: Prepared by the title company or closing attorney and filed just before or at closing, or sometimes on the day of closing.
Use a statement for taxes and records
The settlement statement is one of the most useful documents you will receive at closing because it includes the following:
Property taxes paid or deducted Transfer taxes Recording fees Real estate commissions Closing costs paid by the seller Buyer credits and adjustments
In particular, sellers should retain this documentation for capital gains reporting purposes.
Compliance and accuracy checklist
Before signing the final document, it’s worth running through the following short accuracy checklist.
Check to see if you received the closing disclosure at least three business days before closing Compare the loan terms and loan estimate Make sure the closing disclosure totals match the closing statement Check prorations, credits, and payoffs Contact your lender or closing agent about unexpected fees
FAQ: About Settlement Statements and Closing Disclosures
1. Are settlement and closing the same thing?
no. Closing is the event where documents are signed. Settlement is the financial accounting of a transaction and is documented on a settlement statement.
2. What is the settlement document used for?
Itemizes all charges, credits, deposits, and fees for both buyers and sellers.
3. When should the seller receive the settlement statement?
It is usually provided by the title company or closing attorney shortly before or on the day of closing.
4. Is there another name for the settlement statement?
Yes, the ALTA Settlement Statement, or in some cases the old HUD-1 Settlement Statement.
