What is the purpose of a closing statement (HUD-1 or Closing Disclosure)?

What is the purpose of a closing statement (HUD-1 or Closing Disclosure)?

• A. It confirms the buyer's loan approval and funding.
• B. It itemizes credits and debits to determine net proceeds at closing.
• C. It lists the current market value of the property.
• D. It records the transfer of title to the buyer.

Answer: (B)

The main idea behind the closing statement is to provide a complete accounting of the transaction’s money side. It lists every debit and credit for both sides—loan charges, title fees, taxes, prepaid items, and any credits from the seller—so you can see exactly how much cash changes hands. By totaling these charges and credits, it shows the net proceeds the seller will receive and the total cash the buyer must bring to closing. This makes the financial outcome clear and verifiable for everyone involved. It isn’t about confirming loan approval, stating the property’s market value, or recording the transfer of title; those aspects are handled by other parts of the process (the loan decision, appraisal, and the deed/recording).

The main idea behind the closing statement is to provide a complete accounting of the transaction’s money side. It lists every debit and credit for both sides—loan charges, title fees, taxes, prepaid items, and any credits from the seller—so you can see exactly how much cash changes hands. By totaling these charges and credits, it shows the net proceeds the seller will receive and the total cash the buyer must bring to closing. This makes the financial outcome clear and verifiable for everyone involved. It isn’t about confirming loan approval, stating the property’s market value, or recording the transfer of title; those aspects are handled by other parts of the process (the loan decision, appraisal, and the deed/recording).