Closing costs are the collection of fees and prepaid items due at the closing table — above and beyond your down payment. On a $400,000 home with 10% down, closing costs typically run $7,200–$18,000. Understanding every line item puts you in a position to negotiate, shop, and reduce the total.
Section A: Lender Origination Charges (Negotiable)
These are fees the lender charges to originate your loan. They appear on your Loan Estimate in Section A and are the most negotiable costs in a mortgage transaction.
- Origination fee: 0.5–1% of loan amount ($1,500–$3,000 on a $300k loan). Covers the lender's processing and profit margin. Fully negotiable — ask for a reduction.
- Discount points: optional prepaid interest to buy down your rate. 1 point = 1% of loan.
- Application fee: $0–$500. Many lenders waive this — ask upfront.
- Underwriting fee: $500–$1,500. Covers the cost of evaluating your application. Also negotiable.
Section B: Third-Party Services (Partially Shoppable)
These fees go to third parties (not the lender), and your Loan Estimate must indicate which ones you can shop for. For those you can shop, comparing providers can save hundreds.
- Appraisal: $400–$800. Required by lender to confirm property value. You cannot skip this, but you can sometimes challenge a low appraisal.
- Title search: $200–$400. Research to verify no liens or ownership disputes exist.
- Title insurance (owner's policy): $500–$1,500. One-time premium protecting you against future title claims. Shoppable — compare title companies.
- Title insurance (lender's policy): $300–$1,000. Protects the lender; required by almost all lenders.
- Settlement/closing fee: $500–$1,000. Paid to the title company or attorney who oversees closing.
- Credit report: $30–$50. The lender's cost to pull your credit.
- Flood certification: $15–$25. Determines if the property is in a flood zone.
- Survey (if required): $400–$700. Verifies property boundaries.
Prepaid Items and Escrow Setup
These aren't fees — they're money you're prepaying for expenses you'll owe anyway. They appear separately on your Closing Disclosure and often surprise borrowers.
- Prepaid interest: the per-diem interest from your closing date to the end of the month. The later in the month you close, the lower this amount.
- Homeowners insurance premium: lenders typically require 12–14 months paid upfront.
- Property tax escrow: 2–6 months of property tax collected to fund your escrow account at closing.
- HOA fees: if applicable, prorated from your closing date.
How to Reduce Closing Costs
- Negotiate origination fees — many lenders will reduce or waive them for strong borrowers.
- Shop for title insurance and settlement services — this is explicitly your right under RESPA.
- Ask about lender credits — accepting a 0.125–0.25% higher rate can eliminate origination costs.
- Close later in the month to minimize prepaid interest days.
- Ask the seller to cover 2–3% of closing costs as a concession — common in buyer's markets.
- Compare at least 3 Loan Estimates side-by-side — Section A + B totals reveal the real cost difference.
Closing Costs for Refinances vs Purchases
Refinance closing costs run slightly lower — there's no transfer tax, no real estate agent commission, and owner's title insurance is often reduced or waived. Expect 1–3% of the loan amount. On a $350,000 refi, that's $3,500–$10,500. The break-even calculation — monthly savings divided into closing costs — tells you how long to stay to justify the expense.
Closing costs are real money, but many are negotiable and all are knowable in advance. Your Loan Estimate (delivered within 3 business days of application) locks in most fees. Compare it against your Closing Disclosure at signing — fees cannot increase more than 10% in most categories. Use the Closing Costs Estimator to preview what you'll owe before you apply.
