A Buyer's Guide to Understanding Closing Costs

Closing costs are the various fees paid at the close of a real estate transaction. They typically range from 2% to 5% of the home's purchase price. These costs are separate from your down payment and cover services from your lender, title company, and other third parties.

Common closing costs include: Lender fees (origination, application fees), third-party fees (appraisal, credit report), title and escrow fees (title search, title insurance, escrow agent fees), and prepaid items (property taxes, homeowners insurance). Within three days of applying for a loan, you will receive a Loan Estimate (LE) detailing these costs. A few days before closing, you will receive a Closing Disclosure (CD) to compare with the LE. Reviewing these documents carefully is essential to understanding the final cash amount you'll need to bring to the closing table.