Closing Costs

What Are Closing Costs? Every Fee Buyers Pay, Explained

By Aritz Boveda · Published October 21, 2026
Fact-checked against primary sources on October 21, 2026

Closing costs are the fees and upfront payments you hand over when you finalize a home purchase and mortgage, on top of your down payment. The Consumer Financial Protection Bureau says they typically run 2% to 5% of the purchase price, so on a $350,000 home, plan for roughly $7,000 to $17,500. Where you land in that range depends on your loan, your lender, and especially your state and county.

The total isn’t one fee. It’s six groups of charges, and they appear in the same order on your Loan Estimate and Closing Disclosure. Here they are, one at a time.

The six groups of closing costs

1. Lender fees (origination charges)

This is what the lender charges to make the loan: application, underwriting and origination fees, plus any discount points you choose to buy. These amounts can’t increase between your Loan Estimate and closing unless there’s a valid change, such as a new loan amount. Points are optional; our guide to whether mortgage points are worth it shows how to check the break-even.

2. Services the lender requires but you can’t shop for

The lender picks the provider for a few required services. The appraisal is the big one. A credit report fee, flood zone determination and tax monitoring fee often appear here too.

3. Services you can shop for

Title services usually make up most of this group: the title search, the lender’s title insurance policy, and the settlement or escrow agent’s fee. Some areas also require a survey or a pest inspection. The CFPB says you can shop for every service listed in Section C of your Loan Estimate, and the lender must give you a written list of providers for those services. If you use a provider from that list, these charges generally can’t rise more than 10% in total at closing.

4. Taxes and other government fees

Your county charges recording fees to put the deed and mortgage in the public record. These are usually based on the type of document or page count, not the price. Transfer taxes are different: they’re set by state or local law as a percentage of the sale price or loan amount. Local law also decides whether the buyer, the seller, or both pay them, which is a big reason closing costs vary so much by location.

5. Prepaids

These aren’t fees. They’re early payments of costs you’d owe anyway. The usual items are the first year of homeowners insurance and the mortgage interest that builds up between your closing date and the end of that month. Close late in the month and this line shrinks.

6. Initial escrow deposit

If your lender collects property tax and insurance through an escrow account, you fund it at closing. Federal rules let the lender collect enough to keep the account from going negative, plus a cushion of up to two months of estimated payments.

Worked example: closing costs on a $350,000 home

Assume a $350,000 purchase with 10% down, so a $315,000 loan. The interest rate (6.5%) is illustrative, and every fee below is a sample figure, not a quote. Property taxes are assumed at $3,850 a year and insurance at $1,800 a year. The buyer closes with 15 days left in the month and, in this county, pays a 0.2% transfer tax.

That’s about 2.6% of the price, near the low end of the CFPB range. The prepaid interest is $315,000 × 6.5% ÷ 365 = about $56.10 a day, times 15 days. Add the $35,000 down payment and the buyer needs $44,128.50 at closing, before any credits.

In a county with a 1% buyer-paid transfer tax, or with higher title insurance rates, the same purchase could easily cost several thousand dollars more. Your Loan Estimate is the only reliable number for your deal.

How to lower your closing costs

Shop the services you’re allowed to shop

Get your own quotes for title services and the settlement agent, then compare them with the providers on the lender’s list. If a provider you find quotes $1,750 for the work priced at $2,150 above, that’s $400 saved for a few phone calls. Ask the lender first whether it will work with a provider that isn’t on its list.

Ask the seller to pay part of them

A seller concession is a credit from the seller toward your closing costs, negotiated in the purchase contract. Lenders cap it. On conventional loans backed by Fannie Mae, the limit for a primary residence is:

Our buyer at 90% loan-to-value could receive up to 6% of $350,000, or $21,000, though Fannie Mae doesn’t allow the credit to be used toward the down payment, and in practice it can only cover costs you actually owe at closing. A $5,000 seller credit would cut their closing costs to $4,128.50. FHA, VA and USDA loans set their own limits, and a few, like VA, count some costs differently, so ask your loan officer which cap applies. Keep in mind the CFPB’s warning: sellers who pay your costs often want a higher price in return, so you may still pay for it through the loan.

Take a lender credit

A lender credit is the reverse of points: the lender pays some of your costs in exchange for a higher interest rate. A credit of 0.5% of this loan would be $1,575. It saves cash now but costs more each month for as long as you keep the loan. The mortgage points guide walks through the same break-even math in reverse. Loans advertised as “no closing cost” usually work this way, or they add the costs to your balance.

Pick your closing date

Closing near the end of the month reduces the prepaid interest you owe at closing. It doesn’t change your total interest, but it lowers the cash you need that day.

What to check before you sign

You’ll see your final closing costs on the Closing Disclosure at least three business days before closing. Compare it with your Loan Estimate line by line; our Loan Estimate vs. Closing Disclosure checklist shows which fees can change and by how much. If a number looks off, ask your loan officer in writing before closing day, not at the table.