Closing costs are the fees and prepaid items you pay to finalize a mortgage, separate from your down payment. They often total roughly 2% to 5% of the loan amount, depending on the loan, the state, and the property.
What's Included
Lender costs
- Origination or underwriting fees
- Discount points, if you choose to pay them to lower your rate (see mortgage points explained)
- Credit report
Third-party costs
- Appraisal
- Title insurance and escrow or settlement fees
- Recording fees and transfer taxes, set by the county or city
- Survey or inspection fees, where required
Prepaids and escrow deposits
- Homeowners insurance, usually the first year
- Prepaid interest from your closing date to the end of the month
- Initial escrow deposit for future taxes and insurance (see what escrow is)
When You'll See the Numbers
For most home loans, you'll get a Loan Estimate within three business days of applying, which lists expected costs. At least three business days before closing, you'll get a Closing Disclosure with the final numbers. Compare the two, and ask about anything that changed.
How to Lower Closing Costs
- Compare Loan Estimates from more than one lender, looking at lender fees and points together.
- Shop the services you're allowed to shop, which your Loan Estimate lists.
- Ask about lender credits. A slightly higher rate can come with a credit that covers some costs.
- Negotiate seller credits on a purchase, within your loan program's limits.
- Time your closing. Closing late in the month reduces prepaid interest, though it doesn't change your total cost much.
Can You Roll Closing Costs Into the Loan?
On a refinance, often yes, if you have enough equity. On a purchase, usually not directly, but seller credits and lender credits can reduce what you bring to closing.
Want an estimate for your situation? Send me your scenario.
Closing Cost FAQ
How much are closing costs on a mortgage?
Often about 2–5% of the loan amount, depending on the loan, state, and property. In some states, transfer taxes add more.
Can closing costs be negotiated?
Some can. Lender fees and points vary between lenders, you can shop some third-party services, and sellers can sometimes pay part of your costs.
Who pays closing costs, the buyer or the seller?
Usually each side pays its own, but local custom and your purchase contract decide who pays what.
In the financial industry since 2015. Licensed loan officer in Los Angeles, California. NMLS #1493724, with UTM Financial, LLC (NMLS #2591548). More about Ivan
This article is general education, not financial, tax, or legal advice. Loan guidelines vary by lender and change often. Not a commitment to lend.