Definition
Closing costs
Closing costs are the fees and prepaid items due when a mortgage closes, on top of any down payment. They include lender charges such as origination and points, third-party services such as appraisal and title insurance, government recording fees and taxes, and prepaids that fund interest and the escrow account.
Closing costs fall into four groups: lender fees (origination, underwriting, points), third-party services (appraisal, credit report, title search and title insurance, settlement or attorney fees), government charges (recording fees and, in some states, transfer taxes), and prepaids (daily interest to the first payment date, the first year of homeowners insurance and the initial escrow deposit).
Worked example. On a $350,000 purchase with a $315,000 loan, an illustrative itemization might be: origination $2,500, appraisal $600, credit and processing $300, title insurance and settlement $2,400, recording $250, prepaid interest $800, insurance premium $1,500 and an initial escrow deposit of $1,600. Total: $9,950. Add the $35,000 down payment and the cash to close is about $44,950, before any seller credits or earnest money.
Amounts vary widely by state, county, lender and loan size. Sellers can often contribute up to a program limit, and lender credits can cover some costs in exchange for a higher rate. Borrowers receive a Loan Estimate within three business days of applying and a Closing Disclosure before closing; those forms, not online estimates, show the actual figures. The closing cost calculator builds a ballpark from the main categories.
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FAQ · 2 questions
Questions about Closing costs
Can closing costs be rolled into the loan?
On a refinance, often yes, within LTV limits. On a purchase, they usually must be paid in cash, though seller credits and lender credits can cover part of them.
When will I know my exact closing costs?
Your Loan Estimate gives itemized estimates after you apply, and the Closing Disclosure, which you receive before closing, shows the final figures.
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