Your down payment isn't the only cash you'll need at closing. Closing costs are the fees and expenses required to finalize your mortgage, and they typically run between 2% and 5% of the loan amount. Knowing what they cover helps you budget and avoid surprises.
What's Included in Closing Costs?
- •Lender fees: origination, underwriting, and application charges.
- •Title services: title search and title insurance.
- •Government fees: recording fees and transfer taxes.
- •Prepaids: prepaid interest, property taxes, and homeowners insurance.
- •Escrow reserves: initial deposits to your escrow account.
How Much Should You Budget?
On a $400,000 loan, expect closing costs somewhere in the $8,000–$20,000 range. The exact amount depends on your location, loan type, and lender. You'll receive a Loan Estimate within three days of applying that breaks down your specific costs.
Some closing costs are negotiable. Always review your Loan Estimate and ask your lender about anything unclear.
Ways to Reduce Closing Costs
You can sometimes ask the seller to cover part of your closing costs, choose a lender credit to lower upfront fees in exchange for a slightly higher rate, or shop around for title and insurance services rather than accepting the default providers. We'll help you compare every option.
