Mortgage Closing Costs Explained
Closing costs are the fees and expenses you pay to finalize your mortgage, paid in addition to your down payment. Knowing what's included helps you budget accurately and avoid surprises at closing.
What's included in closing costs
Closing costs typically include lender fees (origination, underwriting), third-party costs (appraisal, title search, title insurance), prepaid items (property taxes, homeowners insurance, prepaid interest), and recording fees. You'll receive a Loan Estimate early and a Closing Disclosure before closing that itemize each cost.
How much are closing costs
Closing costs generally range from 2% to 5% of the loan amount, depending on the loan type, home price, and location. On a $400,000 loan, that could mean $8,000–$20,000 in closing costs, though your actual figures will vary.
Who pays closing costs
Buyers typically pay most closing costs. In some transactions, you can negotiate for the seller to cover a portion — known as seller concessions — especially in a buyer-friendly market or on certain loan types that allow it.
How to reduce your closing costs
You can lower out-of-pocket cash by negotiating seller concessions, using down payment assistance programs that also cover closing costs, or choosing a lender credit (a slightly higher rate in exchange for lower upfront fees). Some programs offer reduced or waived fees for eligible borrowers.
Frequently Asked Questions
Are closing costs included in the loan?
Most closing costs are paid at closing, though some programs allow certain fees to be financed. Down payment assistance, seller concessions, and lender credits can all reduce the cash you need upfront.
Can the seller pay my closing costs?
Yes, within program limits. Sellers can often contribute a percentage of the purchase price toward your closing costs as a seller concession. The allowable amount depends on the loan type and down payment.
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