Complete Guide to Closing Costs
Closing costs are the fees and expenses you pay when finalizing your mortgage. Understanding these costs helps you budget properly and potentially save thousands.
How Much Are Closing Costs?
Closing costs typically range from 2% to 5% of the loan amount. On a $300,000 home, expect $6,000 to $15,000 in closing costs.
Average Closing Costs by Loan Amount
| Home Price | Low (2%) | Average (3.5%) | High (5%) |
|---|---|---|---|
| $200,000 | $4,000 | $7,000 | $10,000 |
| $300,000 | $6,000 | $10,500 | $15,000 |
| $400,000 | $8,000 | $14,000 | $20,000 |
| $500,000 | $10,000 | $17,500 | $25,000 |
Complete Closing Cost Breakdown
Lender Fees
| Fee | Typical Cost | Description |
|---|---|---|
| Origination Fee | 0.5-1% of loan | Lender's charge for processing your loan |
| Application Fee | $0-500 | Fee to process your application |
| Underwriting Fee | $400-900 | Cost of evaluating your loan application |
| Discount Points | 0-3% of loan | Optional prepaid interest to lower rate |
| Credit Report Fee | $30-50 | Cost to pull your credit reports |
Third-Party Fees
| Fee | Typical Cost | Description |
|---|---|---|
| Appraisal | $400-700 | Professional assessment of home value |
| Home Inspection | $300-500 | Professional evaluation of home condition |
| Title Search | $200-400 | Research to verify clear title |
| Title Insurance | $1,000-3,000 | Protects against title problems |
| Survey | $350-500 | Verifies property boundaries |
| Attorney Fees | $500-1,500 | Required in some states |
Government Fees
| Fee | Typical Cost | Description |
|---|---|---|
| Recording Fees | $50-250 | County fee to record the deed |
| Transfer Taxes | Varies by state | State/local tax on property transfer |
Prepaid Items (Not Fees, But Due at Closing)
| Item | Typical Cost | Description |
|---|---|---|
| Homeowners Insurance | $1,000-3,000/year | First year premium often due at closing |
| Property Taxes | 2-6 months | Prorated taxes to fund escrow |
| Prepaid Interest | Varies | Interest from closing to first payment |
| Escrow Reserves | 2-3 months taxes/insurance | Cushion in escrow account |
Sample Closing Cost Estimate
$300,000 Home Purchase
| Origination Fee (1%) | $3,000 |
| Appraisal | $550 |
| Credit Report | $40 |
| Title Search & Insurance | $1,800 |
| Attorney Fee | $750 |
| Recording Fees | $150 |
| Homeowners Insurance (1 year) | $1,500 |
| Property Tax Escrow (3 months) | $1,125 |
| Insurance Escrow (2 months) | $250 |
| Prepaid Interest (15 days) | $750 |
| Total Closing Costs | $9,915 |
This equals about 3.3% of the purchase price.
How to Reduce Closing Costs
Strategies to Save Money
- Shop multiple lenders: Compare Loan Estimates from at least 3 lenders
- Negotiate with lender: Ask about reducing origination fees
- Ask seller to pay: Request seller concessions (common in buyer's markets)
- Shop title insurance: You can often choose your own title company
- Close at end of month: Reduces prepaid interest
- Consider lender credits: Accept higher rate for reduced closing costs
- Skip unnecessary services: Some add-ons aren't required
- Ask about first-time buyer programs: Some offer closing cost assistance
Seller Concessions
You can negotiate for the seller to pay some or all of your closing costs:
| Loan Type | Max Seller Concession |
|---|---|
| Conventional (3-10% down) | 3% of purchase price |
| Conventional (10-25% down) | 6% of purchase price |
| Conventional (25%+ down) | 9% of purchase price |
| FHA | 6% of purchase price |
| VA | 4% of purchase price + all normal closing costs |
| USDA | 6% of purchase price |
Understanding Your Closing Disclosure
You'll receive a Closing Disclosure at least 3 business days before closing. This 5-page document details:
- Page 1: Loan terms, projected payments, closing costs summary
- Page 2: Itemized closing costs (Sections A-H)
- Page 3: Cash to close calculation
- Page 4: Loan disclosures and terms
- Page 5: Loan calculations and contact information
💡 Compare to Your Loan Estimate
Check that closing costs haven't changed significantly from your Loan Estimate. Some fees can't increase, others can increase up to 10%, and some are unlimited. Ask your lender about any changes!
No-Closing-Cost Mortgages
"No closing cost" mortgages don't eliminate costs—they shift them:
Option 1: Higher Interest Rate
- Lender covers closing costs
- You pay higher rate (typically 0.25-0.5% higher)
- Pay more over life of loan
- Best if: Moving or refinancing within 5-7 years
Option 2: Rolled Into Loan
- Closing costs added to loan balance
- Pay interest on closing costs for 30 years
- $10,000 in closing costs could cost $20,000+ over loan life
- Best if: Cash-strapped but can refinance later
What to Bring to Closing
Closing Day Checklist
- ✅ Government-issued photo ID (both spouses if applicable)
- ✅ Cashier's check for closing costs (amount from Closing Disclosure)
- ✅ Proof of homeowners insurance
- ✅ Copy of purchase contract
- ✅ Closing Disclosure (your copy)
- ✅ Any outstanding documents lender requested
⚠️ Important: Wire Fraud Warning
If wiring closing funds, ALWAYS verify wiring instructions by phone using a number you independently verified—not from an email. Wire fraud is common in real estate transactions!
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