The closing statement, properly known as the HUD1 Settlement Statement, is a summary of all the financial aspects of closing. The statement, which should be available to the buyer and seller, and their representatives, a couple of days ahead of the closing date, is in a standardised format.

The settlement statement has two sheets. Page 1, which is common to both sides of the transaction, sets out the names and addresses of the buyer, the seller and the buyer's lender, and also shows the property location.

This first sheet also summarises the calculations that have been used to generate the 'bottom line' - the amount to be paid by the buyer at closing (at the bottom of the left column), and the amount to be received by the seller at closing (at the bottom of the right column).

Items that are pro-rated, and which appear as either debits or credits on both sides of the transaction, are also put onto the first page of the settlement statement. These include charges like property taxes, HOA fees, that are paid monthly and that are split between buyer and seller according to the closing date.

Line 103 on the buyer's side and line 502 on the seller's side are charges that are carried forward from the second page of the statement.

Page 2 covers all the costs of the sale, distributed between buyer and seller according to convention, or occasionally according to the specific terms negotiated in the sale contract.

The HUD1 Statement can look confusing to someone who has not seen one before, but its standard format makes it easy to interpret by a real estate professional, so you should always rely on your realtor to explain anything on the statement that you do not understand. Title companies, who prepare the closing statements, do sometimes make mistakes, so you should always make sure that the figures are what you expect them to be.

When you are happy that the statement is correct, you should sign it and return it to the Title Company so that they can go ahead with the final documentation for closing.