Closing Costs

Closing costs are the settlement expenses that come with finalizing a mortgage. They fall into a few broad groups: lender fees for originating and processing the loan, third-party costs such as title work and the appraisal, and prepaid items like the first portion of your property taxes and homeowners insurance that get collected up front.

They are separate from your down payment, and they vary from one loan to the next. Some are fixed, some scale with the loan amount, and some are simply pass-throughs from third parties.

Rather than quote a figure that will be wrong for you, the honest answer is that it depends on the loan, the property, the location and the timing. What matters more than the total is that you see the individual line items and understand each one.

You receive a Loan Estimate early in the process and a Closing Disclosure shortly before you sign. Those two documents are designed to be compared. If a number moved, you are entitled to know why.

Some closing costs are negotiable between you and the seller. In some markets and some situations a seller contribution toward closing costs is part of the offer, and in others it is not on the table. Your agent negotiates that side; the financing side is about making sure the numbers line up.

There is no single right answer here — it depends on the market and on the deal.

Many first-time buyer assistance programs help with closing costs as well as the down payment, and some are structured specifically to cover them. That is one of the more useful things about those programs, because closing costs are the expense people are least prepared for.

Which programs apply to you depends on where you are buying, your income, and the current rules. That is worth checking rather than assuming either way.