Buying
9 min read
Understanding Closing Costs
Mike Starr
Founder, MortgageWizardTools · M.S. Organizational Management
Last reviewed: August 2026
Closing costs are the fees and expenses you pay to finalize your mortgage, typically ranging from 2% to 5% of the loan amount.
Common Closing Costs
Lender Fees:
- •Origination fee (0.5-1% of loan)
- •Application fee ($300-$500)
- •Credit report fee ($30-$50)
- •Underwriting fee ($400-$900)
Third-Party Fees:
- •Appraisal ($300-$600)
- •Home inspection ($300-$500)
- •Title search ($200-$400)
- •Title insurance ($500-$3,500)
- •Survey ($300-$500)
Government Fees:
- •Recording fees ($50-$250)
- •Transfer taxes (varies by state)
Prepaid Items:
- •Property taxes (2-6 months)
- •Homeowner's insurance (1 year)
- •Prepaid interest
- •Escrow deposits
Closing Cost Fee Reference Table
| Fee | Typical Range | Negotiable? |
|---|---|---|
| Origination fee | 0.5–1% of loan | Yes |
| Application fee | $300–$500 | Sometimes |
| Credit report fee | $30–$50 | Rarely |
| Underwriting fee | $400–$900 | Yes |
| Appraisal | $300–$600 | No |
| Home inspection | $300–$500 | No |
| Title search | $200–$400 | No |
| Title insurance | $500–$3,500 | No |
| Recording fees | $50–$250 | No |
| Transfer taxes | Varies by state | No |
| Prepaid taxes | 2–6 months | No |
| Prepaid insurance | 1 year | No |
How to Reduce Closing Costs
- •Shop around — Compare Loan Estimates from multiple lenders
- •Negotiate — Some fees are negotiable
- •Ask the seller — Seller concessions can cover some costs
- •Choose a no-closing-cost mortgage — Higher rate, but no upfront fees
- •Close at the end of the month — Reduces prepaid interest
Closing Cost Example
For a $400,000 home with a $320,000 loan:
- •Origination fee: $3,200
- •Appraisal: $500
- •Title insurance: $2,000
- •Prepaid taxes: $3,000
- •Insurance: $1,500
- •Other fees: $1,800
- •Total: ~$12,000 (3.75% of loan)