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 — 0–1% of loan (Negotiable). Charged by lender to process your loan. Shop lenders — some charge $0.
- Discount points — 0–2% of loan (Negotiable). Optional — you choose whether to buy down your rate.
- Application fee — $0–$500 (Negotiable). Many lenders waive this. Ask upfront.
- Underwriting fee — $400–$900 (Negotiable). Can sometimes be reduced or waived — ask your lender.
Third-Party Fees
- Appraisal fee — $500–$800 (Fixed). Set by the appraiser. Required by lender. Not negotiable.
- Home inspection — $300–$600 (Fixed). Paid before closing, not at closing — but budget for it.
- Title search fee — $200–$400 (Negotiable). You can shop for your own title company in most states.
- Title insurance (lender) — $500–$1,500 (Negotiable). Required. Protects lender. Owner's policy (see below) is separate.
- Owner's title insurance — $300–$1,000 (Negotiable). Optional but strongly recommended. Protects you, not just the lender.
- Attorney / settlement fee — $500–$1,500 (Fixed). Required in some states. Set by closing attorney.
- Survey fee — $400–$700 (Fixed). Required if seller doesn't have a recent survey on file.
Prepaids & Escrow
- Homeowners insurance (1 yr) — $1,200–$2,400 (Fixed). First year paid upfront at closing.
- Property tax escrow (2–6 mo) — Varies widely (Fixed). Lender collects cushion to cover upcoming tax bills.
- Prepaid mortgage interest — 1–30 days (Fixed). Interest from closing date to end of month. Closing earlier in month = higher.
- Initial escrow setup — $300–$600 (Fixed). Buffer amount lender holds to manage future tax/insurance payments.
Government Fees
- Recording fees — $100–$500 (Fixed). Paid to county/municipality to record the deed and mortgage.
- Transfer taxes — 0–2% of price (Fixed). 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 | What's In It |
|---|---|---|
| Section A | Origination charges | Lender's fees — points, origination, underwriting |
| Section B | Services you can't shop | Appraisal, credit report, flood cert — set by lender |
| Section C | Services you can shop | Title, settlement, attorney — you can compare these |
| Section E | Taxes and other gov fees | Recording, transfer taxes — fixed by jurisdiction |
| Section F | Prepaids | Insurance, interest, property taxes paid upfront |
| Section G | Initial escrow payment | Buffer amount held by lender for future tax/insurance |
| Section H | Other | HOA fees, home warranty, other miscellaneous items |
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
- Government-issued photo ID (passport or driver's license)
- Cashier's check or confirmation of wire transfer for closing costs
- Proof of homeowners insurance binder
- Your checkbook (for any small last-minute adjustments)
- All documents your lender requested throughout the process
- A pen — you'll sign your name approximately 100 times
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.