Settlement

What Happens at Settlement

Settlement is typically conducted by a closing agent, which may be a title company, escrow officer, or attorney depending on state requirements. During the settlement meeting, the buyer and seller sign all required documents including the mortgage note, deed of trust or mortgage, closing disclosure, and transfer documents. The buyer provides the remaining funds needed to close, which includes the down payment and closing costs minus any earnest money already deposited. The lender wires the loan proceeds to the closing agent for disbursement.

Settlement Costs and the Closing Disclosure

All settlement costs are itemized on the closing disclosure, which the borrower must receive at least before the settlement date. Settlement costs typically include lender fees, title insurance premiums, recording fees, transfer taxes, prepaid items (such as homeowners insurance and property taxes), and escrow deposits. Total closing costs generally range from of the loan amount, though this varies significantly by location and loan type. RESPA requires that settlement service providers disclose their fees accurately and prohibits kickbacks between settlement service providers.

Funding and Disbursement

Once all documents are signed and funds are collected, the closing agent disburses payments to all parties: the seller receives the net proceeds, the previous lender receives any payoff amount, real estate agents receive commissions, and government entities receive taxes and recording fees. In some states, there is a gap between signing and funding, during which the lender performs a final review. The transaction is not complete until the deed is recorded with the county recorder's office, which formally transfers legal ownership.