Closing Cost
A closing cost is a payment required to finalize a home loan and is separate from a down-payment. Read about closing cost, their purpose, how you can pay them and more by clicking learn more below.
Closing is the final step in the home buying and financing process—when ownership officially transfers from the seller to you. During this meeting, you and other parties involved in the transaction will sign all required documents.
Participants may include real estate agents, attorneys, the lender’s representative, and title or escrow company staff. The process typically takes 30 minutes to several hours, depending on any contingencies or escrow instructions.
Most closing paperwork is handled by the professionals involved, though your participation may vary based on the team assisting you.
Before closing, a final walk-through is recommended to confirm all agreed-upon repairs are completed and fixtures remain as negotiated.
In most states, a title or escrow company facilitates settlement. You’ll send in your funds (via wire or cashier’s check), and they’ll handle disbursements, deliver funds to the seller, and release the keys to you.
Statutory closing costs are fees that are mandated by law or government regulation in a real estate transaction. These are not negotiable and typically must be paid regardless of the lender or title company used.
Common examples include:
-
Recording fees – Charged by the county to record the deed and other documents.
-
Transfer taxes – Levied by state, county, or local governments when property changes ownership.
-
Property taxes – Prorated amounts or prepayments required at closing.
-
Flood certification fee – Required by federal law to determine if the property is in a flood zone.
These costs are distinct from lender fees or optional service provider fees and can vary by location.
-
These are fees paid to independent service providers (not the lender or government) involved in processing your real estate transaction. They vary by location, loan type, and provider, but common examples include:
-
Appraisal Fee – $60 to $825. Paid to a licensed appraiser to determine the property’s value.
-
Credit Report Fee – $85 to $150. Covers the cost of pulling your credit report.
-
Title Search & Exam – $150 to $400. Ensures clear ownership and checks for title issues.
-
Title Insurance (Owner & Lender) – $1,000 to $1,500 or more. It protects against title defects; cost varies by state.
-
Settlement/Closing Fee – $300 to $800. Paid to the title or escrow company managing the closing.
-
Pest Inspection – $75 to $150. May be required, especially for Goverment guranteed or insured loans (VA and FHA loans).
-
Survey Fee – $300 to $800. Verifies property boundaries, if needed.
-
Attorney Fee (if applicable) – $500 to $1,500. Required in some states; cost depends on complexity.
-
Flood Certification – $10 to $25. Confirms whether the property is in a flood zone.
💡 Total third-party costs typically range from $1,500 to $3,500, depending on the transaction and location.
-
-
Origination Fee – Typically 0.5% to 1% of the loan amount. Charged for processing and underwriting the loan.
-
Underwriting Fee – Usually $400 to $800. Covers the lender’s risk evaluation and final loan approval.
-
Processing Fee – Ranges from $300 to $700. Pays for administrative work like verifying documents and coordinating the file.
-
Application Fee – Can range from $0 to $500. Sometimes charged upfront when you apply for a loan.
-
Rate Lock Fee – Around $0 to $250 if charged. Secures your interest rate for a specified period.
-
Discount Points – Optional and used to lower your interest rate.
These fees vary by lender, so it’s important to compare the Loan Estimate across different lenders to evaluate the total lender-related charges.
-
Other upfront fees you may encounter at closing (outside of lender, third-party, and statutory fees) include:
-
Prepaid Interest – Interest from the closing date to the end of the month; varies by loan amount and rate.
-
Homeowners Insurance Premium – Typically 1 year paid in advance at closing.
-
Property Taxes (Escrow) – 2 to 6 months of taxes may be collected upfront for the escrow account.
-
HOA Dues – If applicable, may include prorated dues or upfront reserves.
-
Initial Escrow Deposit – Reserves for taxes and insurance; usually 2–3 months of each.
-
VA/FHA/USDA Funding Fees – Upfront fees required for government-backed loans (can sometimes be financed).
-
Upfront Mortgage Insurance Premium (UFMIP) – FHA-specific; usually 1.75% of loan amount (can be financed).
These are typically listed under Section F (Prepaids) and Section G (Initial Escrow Payment) on the Loan Estimate and Closing Disclosure.
-
The Real Estate Settlement Procedures Act (RESPA) contains information regarding the settlement or closing costs you are likely to face. Within 3 business days from the time of your mortgage application, your lender is required to provide you a “Loan Estimate” which is an estimate of settlement or closing costs based on their understanding of your purchase contract. This estimate will indicate how much cash you will need at closing to cover prorated taxes, first month’s interest, and other settlement costs.
