Final answer:
The Closing Disclosure is the standardized closing statement or settlement statement required by RESPA. It itemizes transaction costs and provides transparent financial details to buyers and sellers in real estate transactions, replacing the former HUD-1 Settlement Statement.
Step-by-step explanation:
Standardized Closing Statement in Real Estate Transactions:
The standardized closing statement or settlement statement required by the Real Estate Settlement Procedures Act (RESPA) is known as the Closing Disclosure. It was formerly known as the HUD-1 Settlement Statement before the implementation of the TILA-RESPA Integrated Disclosure (TRID) rules in 2015. The Closing Disclosure form is a critical document provided to borrowers at least three business days before the completion of a real estate transaction. This comprehensive and detailed statement itemizes all of the costs associated with the transaction including lender fees, title fees, and escrow amounts, to give a transparent overview of the financial responsibilities of the buyer and seller in a real estate transaction.
This disclosure helps ensure that potential homeowners have the necessary information regarding the content loaded with financial details about their purchase and understand the terms of their mortgages. The five-page Closing Disclosure replaces the HUD-1 form and includes information such as loan terms projected monthly payments, and how much the buyer will pay in fees and other costs to get their mortgage.