Closing costs are fees and expenses paid during a home purchase or refinance. They can vary based on loan type, property location, lender, loan amount, third-party services, and transaction details.
Why closing costs exist
Closing costs cover services required to complete the mortgage and property transaction. Some costs go to the lender, while others go to third parties such as title companies, appraisers, government recording offices, insurance providers, or tax authorities.
Common closing cost examples
- Lender origination or underwriting fees
- Appraisal fee
- Credit report fee
- Title search and title insurance
- Escrow or settlement fees
- Recording fees
- Prepaid interest
- Property taxes
- Homeowners insurance premiums
- Discount points, if selected
Buying a home and trying to understand your total cash needed?
Closing costs when buying
When buying a home, closing costs are separate from the down payment. Buyers should budget for both. In some transactions, seller credits or lender credits may help reduce out-of-pocket costs, depending on the loan program and agreement.
Closing costs when refinancing
Refinance closing costs may be paid out of pocket, rolled into the new loan where allowed, or offset through lender credits. Each approach has tradeoffs and may affect monthly payment, loan balance, or long-term cost.
How to review closing costs
- Review your Loan Estimate
- Compare lender fees and third-party fees
- Ask which costs are fixed and which may change
- Understand prepaid items vs. lender fees
- Compare the short-term and long-term cost impact