How to Read a Settlement Statement Without Losing Your Mind
That multi-page settlement statement (HUD-1 or Closing Disclosure) doesn't have to be intimidating. For Colorado real estate professionals and their clients, understanding these documents fosters confidence and prevents confusion on closing day.
The Two Main Documents You'll Encounter
Closing Disclosure (CD): Used for most residential mortgage transactions, provided three days before closing.
Settlement Statement (HUD-1): Used for cash transactions and some commercial deals.
Both documents serve the same purpose: to itemize all costs and show exactly where every dollar goes in your Colorado real estate closing.
Section-by-Section Breakdown
Loan Information (Top Section)
- Final loan amount and interest rate
- Monthly payment breakdown
- Total of payments over the loan life
This section confirms that all loan details match what buyers expected. Any last-minute changes here require explanation and may potentially result in a new three-day waiting period.
Closing Cost Details (Middle Section) The meat of the document, broken into categories:
Origination Charges: Lender fees for processing the loan.
Services Borrower Cannot Shop For: Required third-party services like appraisals.
Services Borrower Can Shop For: Colorado title services, inspections, surveys.
Taxes and Government Fees: Recording fees, transfer taxes (varies by Colorado county).
Prepaids and Escrows: Insurance, property taxes, HOA dues.
Colorado-Specific Line Items to Understand
Conservation Trust Fund: Small fee supporting Colorado's parks and wildlife.
Water Tap Fees: Common in developing areas of Colorado.
HOA Transfer Fees: Especially prevalent in Denver metro and mountain communities.
Title Insurance Premiums: Both owners' and lenders' policies
The Bottom Line: Who Pays What
Total Closing Costs: Everything the buyer pays beyond their down payment.
Cash to Close: The final check buyers need to bring (usually via wire transfer).
Seller Net: What sellers receive after all costs and loan payoffs.
Red Flags That Require Immediate Attention
- Loan terms that don't match the original estimate
- Unexpected fees not disclosed earlier
- Mathematical errors in calculations
- Missing credits for seller contributions or earnest money
Common Colorado Closing Cost Surprises
Mountain Property Extras: Septic inspections, well tests, propane tank transfers.
HOA Requirements: Some Colorado communities require full year's dues paid at closing.
Water Rights Documentation: Additional fees for water court research in rural areas.
Survey Requirements: Many Colorado lenders require current surveys, especially for rural properties
Questions Every Professional Should Ask
- Do the loan terms match our original estimates?
- Are all agreed-upon seller credits properly reflected?
- Is earnest money credited correctly?
- Do property tax prorations look accurate?
- Are title insurance costs consistent with estimates?
Helping Clients Understand Their Investment
For many buyers, the settlement statement represents their largest financial transaction. Mortgage lenders and Realtors who take the time to explain each section build trust and confidence.
Pro Tip: Review preliminary settlement statements 24-48 hours before closing. This allows time to correct errors without delaying the closing.
Technology Makes It Easier
Modern Colorado title companies offer electronic access to settlement documents, enabling real-time review and expedited corrections. Canyon Title's digital platform allows all parties review documents securely online.
At Canyon Title, we believe transparency in settlement services builds stronger professional relationships. Our experienced closers take the time to explain every line item, ensuring that all parties thoroughly understand their Colorado real estate transaction.