Closing
Closing costs explained, line by line
Closing costs usually run 2% to 5% of the loan amount. Here is what each line on your estimate pays for, and which ones you can shop.
Published
Read time
6 min read
By
Andre Wallace
Three business days after you apply, you receive a Loan Estimate. Page two lists your closing costs. It looks dense, but it breaks into a handful of plain groups.
Loan costs
Origination charges: what the lender or broker charges to make the loan, including any points
Appraisal, credit report and flood certification fees
Title insurance and settlement or escrow fees
Other costs
Recording fees and transfer taxes charged by the county
Prepaid interest from closing day to the end of the month
Initial deposits into your escrow account for property taxes and insurance
Your first year of homeowners insurance
What you can shop
Your Loan Estimate lists which services you are allowed to shop for, often title and settlement services. Getting a second quote for those lines is fair game and can save a few hundred dollars.
Ways to lower the cash you bring
Ask the seller for a credit toward closing costs in your offer
Take a lender credit in exchange for a slightly higher rate
Close near the end of the month to reduce prepaid interest
Look into down payment and closing cost assistance programs
Three business days before closing you receive a Closing Disclosure. Compare it line by line with your Loan Estimate, and ask us about any number that moved.
General education, not advice
This guide explains how mortgages generally work. Any rates and payments in examples are sample figures for illustration, not a commitment to lend. Rules change and your situation is your own, so talk to a licensed loan officer before you decide.
