Closing costs are fees paid at the end of the home purchase transaction — typically ranging from 2% to 5% of the loan amount. On a $400,000 mortgage, that's $8,000–$20,000. Understanding what's in that number tells you what's negotiable and what isn't.
Lender Fees (Negotiable)
These are charged by your lender and vary significantly between lenders. This is where shopping around pays off.
| Fee | Typical range | Notes |
|---|---|---|
| Origination fee | 0–1% of loan | Some lenders charge 0% in exchange for a slightly higher rate |
| Underwriting fee | $400–$900 | May be bundled into origination |
| Application fee | $0–$500 | Some lenders waive this |
| Discount points | 1% of loan per point | Optional; each point lowers rate ~0.25% |
Third-Party Fees (Shoppable)
These are paid to services required for the transaction. You can often choose your own provider and shop for better prices.
| Fee | Typical range |
|---|---|
| Title search | $150–$400 |
| Title insurance (lender) | $500–$1,500 |
| Owner's title insurance | $500–$1,500 (optional but recommended) |
| Home appraisal | $300–$600 |
| Home inspection | $300–$600 |
| Attorney/closing agent | $500–$1,500 |
| Recording fees | $50–$250 |
Prepaid Items (Not Fees — You'd Pay These Anyway)
Prepaid items are not lender profits — they're costs you'd incur regardless. They're collected at closing to fund your escrow account and cover initial interest.
- Prepaid interest — daily interest from closing date to end of month
- Homeowner's insurance premium — first year paid upfront
- Property tax escrow deposit— 2–3 months' worth
- Insurance escrow deposit— 1–2 months' worth
Government Taxes and Fees
These vary dramatically by state and county and are non-negotiable:
- Transfer tax (0%–2%+ of sale price depending on state)
- Recording tax / documentary stamp tax
- FHA upfront MIP: 1.75% of loan (if using FHA financing)
- VA funding fee: 1.25–3.3% of loan (if using VA financing)
How to Compare Closing Costs Across Lenders
Within 3 business days of applying, each lender must provide a Loan Estimate— a standardized 3-page form. Page 2 breaks down all fees into A (origination), B (services you can't shop), and C (services you can shop). Compare the total of Section A across lenders — that's the lender's own cost.
The APR on the Loan Estimate factors in most fees, making it a better comparison tool than the interest rate alone.
Seller Concessions and Lender Credits
Two strategies can reduce out-of-pocket closing costs:
- Seller concessions— you negotiate for the seller to pay a portion of your closing costs. Common in buyer's markets.
- Lender credits— the lender covers some fees in exchange for a slightly higher rate. This makes sense if you plan to sell or refi within a few years and don't want to pay large upfront costs.