How Much Are We Talking?
Closing costs typically run 2%–5% of the purchase price. On a $400,000 home that's $8,000–$20,000 due at closing — in addition to your down payment. This is why you can't spend every saved dollar on the down payment. Budget for both.
Every Fee — Line by Line
Lender Fees
Loan origination fee
Charged by lender to process your loan. Shop lenders — some charge $0.
Discount points
Optional — you choose whether to buy down your rate.
Application fee
Many lenders waive this. Ask upfront.
Underwriting fee
Can sometimes be reduced or waived — ask your lender.
Third-Party Fees
Appraisal fee
Set by the appraiser. Required by lender. Not negotiable.
Home inspection
Paid before closing, not at closing — but budget for it.
Title search fee
You can shop for your own title company in most states.
Title insurance (lender)
Required. Protects lender. Owner's policy (see below) is separate.
Owner's title insurance
Optional but strongly recommended. Protects you, not just the lender.
Attorney / settlement fee
Required in some states. Set by closing attorney.
Survey fee
Required if seller doesn't have a recent survey on file.
Prepaids & Escrow
Homeowners insurance (1 yr)
First year paid upfront at closing.
Property tax escrow (2–6 mo)
Lender collects cushion to cover upcoming tax bills.
Prepaid mortgage interest
Interest from closing date to end of month. Closing earlier in month = higher.
Initial escrow setup
Buffer amount lender holds to manage future tax/insurance payments.
Government Fees
Recording fees
Paid to county/municipality to record the deed and mortgage.
Transfer taxes
Varies by state and county. Some states have none; others are significant.
How to Read Your Closing Disclosure
Your lender must send you the Closing Disclosure (CD) at least 3 business days before closing. Read every page. Here's how it's organized:
| Section | Label |
|---|---|
| Section A | Origination charges |
| Section B | Services you can't shop |
| Section C | Services you can shop |
| Section E | Taxes and other gov fees |
| Section F | Prepaids |
| Section G | Initial escrow payment |
| Section H | Other |
Compare your Closing Disclosure to your original Loan Estimate side-by-side. Fees in Section A cannot increase. Fees in Section C can increase up to 10%. If something changed dramatically, ask your lender to explain — in writing.
How to Reduce Your Closing Costs
Shop your title company
In most states you can choose your own title company — not just the one your agent suggests. Get quotes from 2–3. Savings can be $500–$1,500.
Ask the seller to cover closing costs
In slower markets, "seller concessions" of 2–3% toward closing costs are common. In hot markets, less likely — but always worth asking.
Compare Loan Estimates from multiple lenders
Lender fees vary wildly. The Loan Estimate (LE) you receive within 3 days of application shows all fees side-by-side. Compare apples to apples.
Close later in the month
Prepaid interest covers from closing date to month end. Closing on the 28th instead of the 3rd saves ~25 days of prepaid interest.
Ask lender to waive junk fees
"Processing fee," "administrative fee," "courier fee" — many of these are profit margin, not real costs. Politely ask what's waivable.
What to Bring on Closing Day
Key Takeaways
Budget 2%–5% of purchase price for closing costs — on top of your down payment. For a $400K home that's $8,000–$20,000.
Get the Loan Estimate (LE) from your lender within 3 days of applying and compare it line-by-line with competitors.
Review your Closing Disclosure 3 business days before closing — you have the legal right to this. Don't sign anything you don't understand.
Lender fees and title fees are negotiable. Appraisal, recording, and government fees are not.