General Rule of Thumb

To simplify closing statements for students, think of "Debits" and "Credits" in terms of cash flow. A Debit is money that a party owes or must pay at closing (an expense). A Credit is money that a party receives or has already paid (a deposit or reimbursement). The totals for the buyer and seller will essentially never be the same number; they are two separate balance sheets.For the seller, the Credit is essentially the purchase price—this is the money coming in. Debits to the seller include everything reducing that profit: the payoff of their existing mortgage, the broker’s commission, the preparation of the deed, and the prorated share of unpaid taxes or rent.For the buyer, Debits include the purchase price and all closing costs (insurance, taxes, survey, recording fees). Credits are the resources the buyer brings to cover those costs: the earnest money deposit (which they already paid), the new loan amount (money the bank puts in), and any prorated amounts the seller owes them (like unpaid property taxes).