In a mortgage closing, what document specifies the financial transactions between parties?

The HUD-1 Settlement Statement is the correct document that specifies the financial transactions between the parties involved in a mortgage closing. It provides a detailed breakdown of all the costs and fees associated with the real estate transaction, including the purchase price, loan fees, title insurance, and other charges. This form was primarily used for transactions where the borrower was obtaining a loan to purchase a home, but it has since been largely replaced by the Closing Disclosure for most transactions involving a mortgage.

The major value of the HUD-1 is its role in ensuring transparency concerning all financial aspects of the transaction, allowing all parties to see exactly where funds are distributed. It also provides a clear comparison of the estimated costs that were provided at the start of the mortgage process (typically from the Loan Estimate).

While the Loan Estimate provides preliminary information about loan terms and costs before closing, it does not serve as a comprehensive outline of the actual monetary transactions occurring at closing. The Closing Disclosure replaced the HUD-1 for most loan types and is also crucial in summarizing the final terms and costs. However, the structure and details provided in the HUD-1 made it essential for specifying transactions until its phased-out use.

The Appraisal Report is unrelated to financial transactions between the parties