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Closing Costs
Closing costs are fees and expenses paid when finalizing a mortgage, typically 2% to 5% of the home's purchase price. They include lender fees, title insurance, appraisal, and prepaid items.
How It Works
Closing costs are the fees you pay to complete a real estate transaction. They typically range from 2% to 5% of the purchase price and are paid at the closing table (or rolled into the loan in some cases). Closing costs include lender origination fees (0.5-1% of the loan), appraisal ($400-$700), title insurance ($1,000-$3,000), attorney fees, recording fees, prepaid property taxes, prepaid homeowners insurance, and prepaid interest. Some costs are negotiable — you can shop for title insurance, and sellers can contribute toward your closing costs (up to 3-6% depending on loan type). On a $400,000 home, expect $8,000 to $20,000 in closing costs.
Key Facts
Typically 2% to 5% of the purchase price
Include lender fees, title insurance, appraisal, prepaid taxes and insurance
Some fees are negotiable or shoppable
Sellers can contribute 3-6% toward buyer closing costs
Can sometimes be rolled into the loan (increases your balance)
Refinance closing costs are typically 2-3% of the loan amount
Example
On a $350,000 home purchase: origination fee $1,750, appraisal $550, title insurance $2,100, attorney fees $800, recording fees $250, prepaid taxes $2,900, prepaid insurance $1,400, prepaid interest $650, misc fees $600. Total: approximately $11,000 (3.1% of purchase price).
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Frequently Asked Questions
Both pay closing costs, but they're different. Buyers pay lender fees, title insurance, appraisal, and prepaid items. Sellers pay real estate agent commissions (5-6%) and transfer taxes. Buyers can negotiate for the seller to contribute toward buyer closing costs.
Sometimes. FHA and VA loans allow the funding fee/guarantee fee to be rolled in. Some lenders offer "no-closing-cost" mortgages where fees are added to the loan balance or offset by a higher interest rate. This reduces upfront costs but increases long-term cost.