Closing Costs

Closing costs are the fees and expenses required to finalize your mortgage loan and complete the home purchase. These costs are separate from your down payment and are typically paid at the closing of your real estate transaction.

Understanding closing costs ahead of time can help you better prepare financially and avoid surprises when it’s time to finalize your loan.

How Much Are Closing Costs?

In most cases, closing costs range from about 2% to 6% of the total loan amount, depending on the property, location, and loan program.

For example:

These costs can vary based on factors such as lender fees, property taxes, title services, and insurance requirements.

What Is Included in Closing Costs?

Closing costs consist of several fees associated with processing and completing your mortgage loan. Common costs include:

Loan Origination Fees

Charged by the lender for processing and underwriting the mortgage loan.

Appraisal Fee

A professional appraisal verifies the home’s market value for the lender.

Title Search & Title Insurance

Ensures there are no ownership disputes or liens on the property.

Credit Report Fee

Covers the cost of reviewing your credit history during the loan approval process.

Recording Fees

Charged by the local government to officially record the property purchase.

Property Taxes & Insurance

Prepaid property taxes and homeowners insurance may be required at closing.

These costs help ensure that the property ownership transfer and mortgage loan are legally completed and properly documented.

Who Pays the Closing Costs?

Typically, buyers pay most of the closing costs, but in many cases the seller may contribute a portion of them as part of the purchase agreement.

Depending on the loan program and negotiation:

• Sellers may cover part of the closing costs

• Lenders may offer lender credits

• Some programs allow closing costs to be financed into the loan

Your loan officer can help determine the best strategy for your situation.

When Are Closing Costs Paid?

Closing costs are usually paid on the day you finalize your home purchase, also known as the closing or settlement date.

Before closing, your lender will provide two important documents:

• Loan Estimate – an early estimate of your loan terms and closing costs

• Closing Disclosure – the final breakdown of your loan and fees

These documents help ensure transparency and allow you to review the exact costs before signing the final paperwork.

Can Closing Costs Be Reduced?

Yes. There are several ways borrowers may lower or manage closing costs:

✔ Negotiating seller contributions
✔ Choosing a lender with competitive fees
✔ Comparing multiple loan options
✔ Using lender credits to offset upfront costs
✔ Applying for first-time homebuyer assistance programs

A mortgage professional can help you explore these options.