Closing 101: What is the Settlement Process?

Closing is the pivotal moment in a real estate transaction. All parties involved have come a long way to get to this moment. There’s still work to be done, but once the closing is complete, the property will finally be yours.

The idea of closing can be a little overwhelming to home buyers, especially because the process of buying a home up to this point has probably taken a lot out of you. Rest assured that it’s almost finished. In this week’s blog, we’ll talk about closing and how it works.

Closing 101: The Settlement Process

What is Closing?

Closing is when the title of a property is transferred to the buyer from the seller. This is accomplished with a property deed. There are a number of ways to transfer title, which we’ve written about in a previous blog. In addition, the buyer gives a deed of trust to the mortgage lender at this time.

Closing and settlement mean the same thing, so you can use them interchangeably.

The Process

Before Closing

You’ll get information about some closing costs before you even put a contract on the house. If you’re getting a loan, the lender will give you a Good Faith Estimates within 3 days after you submit your loan application to detail your loan costs. The lender should also provide you with a booklet that describes the settlement process.

During Closing

After the seller accepts your contract on the home, it’s time to get a settlement agent. A settlement agent (also known as a closing or escrow agent) handles the closing process.

If you give the seller an earnest money deposit, the agent will deposit it into an escrow account. Escrow accounts hold funds related to closing until they are ready to be dispersed.

Now it’s time to do work related to the home’s title. The closing agent will request a title search to be completed by a title company. The goal of the title search is to uncover any flaws on the home’s title before it’s transferred. For example, if the current owner is currently delinquent on property taxes, this issue would have to be dealt with before the transfer of title.

Some title issues cannot be uncovered through a title search, which is why the buyer must purchase title insurance for the lender during closing. The buyer may also purchase title insurance for themselves.

The settlement agent handles a number of other tasks during closing. These include:

  • Coordinating with all parties involved in the transaction
  • Obtaining mortgage payoff amounts and relevant tax, water, and homeowners association figures.
  • Preparation of the deed to transfer title, loan documents, settlement sheet, and title insurance commitment.

HUD-1 Settlement Statement

Once the majority of closing tasks have been completed, the agent will prepare the HUD-1 Statement, which details all of the closing costs for the buyer and seller.

Closing Day

The day has finally arrived! On closing day, the seller will transfer the property to the buyer via the deed. Some final documents are signed, and the property officially changes hands.

After Closing

After closing, the settlement agent does the following:

  • Forwards payment to prior lenders
  • Pays other parties whose services were engaged in closing
  • Pays net funds to the seller
  • Orders a final title search
  • Records real estate documents with local agencies


Choose title insurance with Colony Title Associates.

Colony Title has been in business since 1995 and handles over 2,000 real estate closings per year. We are qualified to aid you with your title insurance and escrow process. If you have any questions or would like to speak to a representative about purchasing title insurance, please give us a call at 410-884-1160 or visit our website for more information.

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