Closing costs explained: what you pay, typical amounts, and how to lower them
The short answer
Closing costs are the fees and prepaid items due when you finalize a mortgage, and they typically total 2% to 5% of the loan amount. They include lender fees, appraisal, title insurance, government recording fees and transfer taxes, and prepaid property taxes, homeowners insurance, and interest. Your Loan Estimate lists them within three business days of applying.
What is included
| Category | Examples | Can you shop for it? |
|---|---|---|
| Lender charges | Origination or underwriting fee, discount points | Yes, by comparing lenders |
| Services the lender requires | Appraisal, credit report, flood certification | Usually no |
| Services you can shop for | Title insurance, settlement or escrow fee, survey, pest inspection | Yes, listed on your Loan Estimate |
| Government fees | Recording fees, transfer taxes | No |
| Prepaids and escrow deposit | First year of homeowners insurance, prepaid interest, property tax reserves | Partly, by shopping insurance |
How much to expect
On a $360,000 loan, 2% to 5% is $7,200 to $18,000. The biggest swing factors are points, your state's transfer taxes, and how many months of taxes and insurance you must prepay.
Ways to lower or shift them
- Compare Loan Estimates from two or three lenders, focusing on section A (origination charges).
- Shop title and settlement services from the list your lender provides.
- Ask for seller credits. With more homes for sale in 2026, sellers are more willing to contribute.
- Take lender credits in exchange for a slightly higher rate.
- Check assistance programs that cover closing costs.
- Close late in the month to reduce prepaid interest. This lowers cash at closing, though not the overall cost.
Three days to review
You must receive your Closing Disclosure at least three business days before closing. Compare it with your Loan Estimate. Some fees cannot increase at all, and others can rise only within set limits.
Common questions
Can closing costs be rolled into the loan?
On a refinance, often yes. On a purchase, closing costs usually cannot be added to the loan, but seller credits and lender credits can cover them.
Who pays closing costs, buyer or seller?
Each side pays its own customary costs, which vary by state. Buyers can negotiate for the seller to pay some of theirs.