Closing costs typically run 2%–5% of the loan amount. On a $400,000 home with 10% down: loan = $360,000, closing costs = $7,200–$18,000. This is due at closing, on top of the down payment.
Lender Fees (Often Negotiable)
- •Origination fee: 0.5%–1% of loan — lender's profit margin, shop and negotiate
- •Application fee: $250–$500, sometimes waived
- •Discount points: Optional, each point = 1% of loan = 0.25% rate reduction
- •Rate lock fee: Sometimes charged, often free for 30–60 day locks
Third-Party Fees (Shop Around)
- •Appraisal: $400–$700 — required by lender, ordered by lender but you can compare
- •Home inspection: $300–$600 — hire your own, negotiate credits for issues found
- •Title search: $200–$400 — verifies no liens on the property
- •Title insurance (owner's): $500–$2,000 — protects you from prior ownership claims, one-time fee
- •Title insurance (lender's): Required by lender, $500–$1,000
Government and Prepaid Fees (Fixed)
- •Recording fees: $50–$250 — charged by local government to record the deed
- •Transfer taxes: Varies widely by state/county — can be significant (0.01%–2%+ of price)
- •Prepaid interest: Interest from closing date to end of month — close late in month to reduce this
- •Homeowner's insurance: First year often paid upfront at closing
- •Property tax escrow: 2–3 months of property taxes deposited into escrow
Request a Loan Estimate within 3 days of applying — lenders are required to provide it. Compare Section A (origination fees), Section B (third-party fees), and Section C (prepaid items) across at least 3 lenders. The Closing Disclosure, provided 3 days before closing, must match the Loan Estimate.
You can negotiate closing costs — and sellers can pay them. In a buyer's market, ask for seller concessions of 2–3% of the purchase price toward closing costs. This lets you keep more cash in your pocket or put more toward down payment.