Closing costs catch a lot of buyers off guard. You've saved for your down payment and then someone hands you a list of fees that add up to thousands more. Here's what you're actually paying for.
Lender fees
- Origination fee: What the lender charges to process your loan. Typically 0.5-1% of the loan amount.
- Discount points: Optional — you pay upfront to buy a lower rate.
- Underwriting fee: The cost of the underwriter reviewing your file. Usually $500-$1,000.
- Application fee: Some lenders charge it, some don't. Negotiate or shop around.
Third-party fees
- Appraisal: $400-$800. Confirms the home's value. Required by the lender.
- Title search and insurance: $1,000-$2,000+. Confirms the seller has clear ownership and protects you from past claims.
- Attorney or settlement fee: Varies by state. Some states require an attorney at closing.
- Home inspection: $300-$600. Not technically a closing cost — usually paid before closing and not required by most lenders, but strongly recommended.
Prepaid items often surprise buyers: you'll pay your first year of homeowners insurance upfront, plus 2-3 months of property taxes into escrow, and prepaid interest from the closing date to the end of the month. These aren't fees — but they're real money you need.
Can you negotiate closing costs?
Yes. Lender fees are negotiable. You can also ask the seller to cover some or all closing costs (a "seller concession") as part of your offer negotiation. First-time buyer programs sometimes offer grants that cover closing costs entirely.
Closing costs vary significantly by location, lender, and loan type. Request a Loan Estimate early so you know what to expect.