Purchasing your first home is thrilling—until you see your closing costs. These third-party fees are due at the mortgage closing and typically run 2 %–5 % of your loan amount. By understanding what goes into these costs—and how to shop or negotiate—you’ll avoid sticker shock and step into homeownership with confidence.
What Are Closing Costs?
Closing costs are the collective fees charged by lenders, title companies, inspectors, and other professionals who help finalize your purchase. Rather than paying each provider separately, you’ll settle the total at closing via your Closing Disclosure (formerly the Good Faith Estimate and HUD-1).
Why Buyers Pay Closing Costs (and When They Can
Be Negotiated)
- Primary Responsibility: Buyers typically pay for loan-related fees (origination, underwriting, appraisal) and title-transfer expenses.
- Seller Credits: Under today’s market—and influenced by the 2024 NAR settlement—sellers no longer must cover buyer-agent commission via the MLS. However, you can still ask the seller for a credit toward your closing costs. In a competitive offer, offering to cover your own agent may strengthen your bid.
Estimating Your Total Costs
- General Range: 2 %–5 % of loan amount (e.g., $8,000–$20,000 on a $400,000 mortgage).
- Shop Lenders for Loan Estimates: Within three business days of your application, lenders must provide a Loan Estimate showing expected costs. Compare at least 2–3 lenders’ estimates.
- Review Your Closing Disclosure: Three days before closing, you’ll receive the final breakdown—use this to confirm numbers and question any fees that seem excessive.
Standard Lender Fees to Anticipate
It’s never a bad idea to have a real estate attorney, but in some states, they’re required. The fees for these bank or law-required attorneys are enveloped in your lender closing costs.
| Fee Type | What It Covers | Typical Cost |
| Origination (Application) | Processing your loan application | 0.5 %–1 % of loan amount |
| Underwriting & Processing | Credit report pull, document review, contract preparation | $500–$1,200 flat |
| Rate Lock | Guarantees your interest rate for a set period | $250–$600 |
| Appraisal | Independent valuation for lender’s collateral protection | $400–$700 |
| Credit Report | Pulling your credit history | $30–$60 |
| Courier & Wire Fees | Transferring documents or funds | $25–$75 each |
| Title-Search & Title Policy | Verifies ownership history & protects lender | 0.3 %–0.5 % of loan; owner’s policy extra |
Insurance & Escrow Requirements
- Homeowners Insurance: Lenders require evidence of coverage before closing—premium is often paid upfront for the first year.
- Private Mortgage Insurance (PMI): If your down payment is < 20 %, you’ll pay PMI premiums at closing and monthly thereafter.
- Flood & Hazard Insurance: In high-risk zones, flood or wind-storm policies may be required. Rate depends on location and coverage limits.
- Escrow Funding: Lenders often collect 2–6 months’ worth of taxes and insurance into an escrow account—expect 1–2 mortgage payments’ worth of reserves at closing.
Surveys, Inspections & Appraisals
- Appraisal: Ordered by your lender to confirm the home’s value. If the appraisal is low, you may need to renegotiate or cover the difference in cash.
- Home Inspection: Optional but highly recommended. Costs $300–$600 and can uncover issues that become negotiation points or repair requests.
- Survey: Ensures property boundaries are accurate—often required in rural or irregular-lot areas. Surveys run $300–$800.
Tips to Minimize Your Closing Costs
- Compare Loan Estimates: Shop not just for rates, but for lower fees.
- Negotiate Seller Concessions: Request seller credits for appraisal or inspection fees.
- Ask About “No-Cost” Lenders: Some lenders offset fees with slightly higher rates—calculate your break-even point.
- Bundle Title & Escrow: Many title companies offer combined packages at a discount.
- Lock Your Rate Strategically: Lock within 30 days of closing to avoid re-lock fees if your closing date shifts.
Bottom Line
Closing costs are a substantial—but manageable—part of buying a home. By educating yourself on typical fees, comparing multiple lenders’ Loan Estimates, and exploring negotiation strategies, you’ll go into your closing appointment prepared—and avoid unwelcome surprises at the settlement table.
Have Questions? Ask April!
Give April D. Robinson a call at 727-BUY-SELL (727-289-7355) to learn more about local areas, discuss selling a house, or tour available homes for sale.
