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Understanding Your Mortgage Closing Costs

Every mortgage comes with costs beyond just the principal and interest amounts—the closing costs. Closing costs are fees associated with purchasing a home, such as transferring the title from the previous owner’s name to yours.

Here’s what you need to know about closing costs while looking into homeownership:


What are closing costs?

Closing costs include a number of costs associated with “closing” the sale. The exact amount of each cost depends on the lender and property; however, you may expect to pay:


● Application fees

● Appraisal fees

● Attorney fees

● Closing or escrow fees

● Credit search fees

● Escrow deposit

● Homeowner insurance

● Inspection fees

● Prepaid interest

● Prepaid property taxes

● Processing fees to finalize your loan

● Title search fees

● Transfer taxes

● Underwriting fee


How do you read your closing costs?

Unfortunately, as you can see, there are a lot of possible costs associated with buying a home. However, no costs should sneak up on you. Lenders are required to detail all closing costs twice—you will receive an initial Loan Estimate after you apply and a Closing Disclosure with finalized amounts a few days before closing. A number of documents are required before you buy and when you sign at closing, but one of the most important is your Closing Disclosure.


The Closing Disclosure will outline the summary of all costs for your home purchase.

What can you expect to pay?

The amount you pay in closing costs really depends on your lender and the property. In general, closing costs range between 2% and 6% of your home purchase prices. So, if your home costs $150,000, you can expect your closing costs might be between $3,000 and $9,000.

 Some lenders, though, do provide assistance with covering or reducing your closing costs, so you should always ask or try to negotiate. You can also shop around for better prices on certain closing costs, such as inspections, which will be outlined on your Loan Estimate.


When are closing costs required?

The closing costs are due at signing. You will receive your Loan Estimate right after you apply so you have time to prepare for paying your closing costs, however, if you have concerns about paying for them, be sure to discuss this with your lender.

What could your mortgage look like?

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