For a buyer, 2 to 5 percent of the purchase price, and the lender has to hand you a written estimate of every line of it within three business days of your application, which makes this the one cost in the transaction you can compare between lenders before you commit.
Closing costs are not one fee. They are three groups of them, and they behave differently: the lender's own charges, which are negotiable and vary a lot between lenders; the third-party services, which are roughly fixed by whoever performs them; and the prepaid items, which are not really costs at all but your own taxes and insurance collected early.
What is in the number
- Lender charges: origination, underwriting, processing, and discount points if you are buying the rate down. The part that differs most between two quotes on the same house.
- Third-party services: appraisal, credit report, title search, title insurance, escrow or settlement fee, recording fees, and a survey where one is required.
- Prepaid items: the first year of homeowners insurance, property taxes to the next due date, and the interest between closing and the first payment. Money you would owe anyway, collected early.
- Escrow account funding: several months of taxes and insurance held by the servicer so the bills get paid on time.
How to compare two lenders honestly
The Loan Estimate is a standard form with the same lines in the same order for every lender, which is exactly why it exists. Put two side by side and read section A, the lender's own charges, before anything else: the third-party and prepaid sections should be similar for the same house, and a quote that looks cheap because it assumed a lower tax bill is not cheap.
Three business days before signing, the Closing Disclosure arrives with the final figures. That waiting period is yours by law and it is the moment to check the final numbers against the estimate rather than at the signing table.
Who pays what
Custom differs by state and, within a state, by county, and none of it is a rule: everything is negotiable in the contract. Sellers commonly cover their own title work and, in a slower market, some or all of the buyer's costs as a concession. If a market has sellers cutting prices, closing help is usually easier to get than a further price cut, because it costs the seller the same and helps the buyer more.
Questions people ask
Can closing costs be rolled into the loan?
Sometimes. Some refinances allow it outright, and on a purchase a lender can offer a credit toward costs in exchange for a higher rate. Both mean paying for them over thirty years rather than at the table.
Are closing costs negotiable?
The lender's own charges are, and so is who pays which line, which is a contract term. The recording fees and transfer taxes a government sets are not.
What are closing costs on a $300,000 house?
Roughly $6,000 to $15,000 for a buyer, plus the prepaid taxes and insurance the lender collects up front. The spread is wide because lender charges and title costs vary more than people expect.