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Closing costs

The fees and upfront charges you pay to finalize a mortgage, apart from the down payment, itemized on your Loan Estimate and Closing Disclosure.

What It Means

Closing costs are the fees and other charges you pay to get a mortgageMortgageA loan used to buy or refinance a home, secured by the home itself and repaid in monthly installments over a set term. See more and complete the purchase or refinanceRefinancingReplacing a loan you already have with a new one, usually to get a lower rate, a different term or a different payment. See more, due on closing day on top of any down paymentDown paymentThe share of a home's price you pay upfront in cash when you buy it; the mortgage covers the rest. See more. The Consumer Financial Protection Bureau (CFPB) explains that they're estimated on your Loan Estimate and confirmed on your Closing Disclosure. They include lender charges, third-party services such as the appraisal and title work, government recording fees and taxes, and money paid ahead for insurance, interestInterest rateThe yearly percentage a lender charges for borrowing money, not counting fees; the APR adds certain fees to show a fuller cost. See more and your escrow accountEscrowOn a mortgage, an account your servicer keeps to pay your property taxes and homeowners insurance, funded by part of each monthly payment. See more.

Try It: Add Up the Closing Costs on a Loan Estimate

Example amounts for a $360,000 loan, grouped the way page 2 of a Loan Estimate groups them. Swap in the numbers from yours.

Loan costs (A to C)$7,200
Other costs (E to G)$5,000
Total closing costs$12,200

That is 3.4% of the loan.

Inside the 2% to 5% range Freddie Mac and Fannie Mae describe as typical.

How People Say It

  • "The seller's covering part of our closing costs."
  • "We need another twelve grand just to close."
  • "Did the Closing Disclosure match the Loan Estimate?"

The Breakdown

Worked example. Example amounts on a $360,000 loan, grouped the way a Loan Estimate groups them:

SectionExample amount
A. Origination chargesLoan origination feeA charge a lender makes for setting up a loan, usually a percentage of the amount borrowed, either paid up front or taken out of the money you receive. See more (the lender's own fees)$3,600
B. Services you cannot shop for (such as the appraisal)$1,200
C. Title work and other services you can shop for$2,400
E. Taxes and other government fees$1,500
F. Prepaids (insurance, interest, taxes paid ahead)$2,000
G. Initial escrow payment at closing$1,500
Total closing costs$12,200

What the result means. $12,200 is 3.4% of the loan, inside the 2% to 5% range that Freddie Mac and Fannie Mae describe as typical. Sections A to C are the cost of the loan and the services around it, while the prepaid and escrow items in F and G are bills you'd owe anyway, collected early. With 1010,000 stepsA popular daily step goal that began as the name of a 1960s Japanese pedometer; later studies find health benefits begin well below it. See more% down on a $400,000 home, this buyer needs $52,200 in cash for closing day before any seller or lender credits.

The three-day timeline

  1. Apply. Within three business days of giving the lender six facts (your name, income, Social Security number, the property address, its estimated value and the loan amount), you get a three-page Loan Estimate.
  2. Compare Loan Estimates from more than one lender, section by section.
  3. At least three business days before closing, you get the five-page Closing Disclosure with the final numbers.
  4. Check it against the Loan Estimate before you sign.

Good to Know

The CFPB says the Closing Disclosure must reach you at least three business days before you close, and those days exist so you can compare it with the Loan Estimate. Ask the lender to explain any number that moved. A refinance has closing costs too, so count them when you decide whether a new loan is worth it.

FAQ

How much are closing costs on a house?

Freddie Mac and Fannie Mae describe typical closing costs as about 2% to 5% of the loan amount or purchase price. Your own figure is on page 2 of your Loan Estimate.

When do I get the Closing Disclosure?

At least three business days before closing, as the CFPB explains. That window gives you time to compare the final terms and costs with your Loan Estimate.

Are closing costs part of the down payment?

No. The down payment goes toward the home's price, while closing costs pay for the loan, the services around it and the taxes and prepaid items due at closing. You need cash for both on closing day.

Do It in Buhata

Goals, Budget

With Plus, create a Goal for your cash to close, the down payment and the Loan Estimate's closing costs together, so the whole amount is one target.

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Related Terms and Categories

  • Mortgage

    A loan used to buy or refinance a home, secured by the home itself and repaid in monthly installments over a set term.

  • Down payment

    The share of a home's price you pay upfront in cash when you buy it; the mortgage covers the rest.

  • Escrow

    On a mortgage, an account your servicer keeps to pay your property taxes and homeowners insurance, funded by part of each monthly payment.

  • Loan origination fee

    A charge a lender makes for setting up a loan, usually a percentage of the amount borrowed, either paid up front or taken out of the money you receive.

  • Private mortgage insurance

    Insurance that protects a mortgage lender if the borrower stops paying, often required on a conventional loan with less than 20% down.

  • Cash-out refinance

    Replacing your mortgage with a new, larger one and taking the difference, minus closing costs, in cash.

Debt and credit

Sources

Consumer Financial Protection Bureau, "What is a Closing Disclosure?"; CFPB, "When do I get a Closing Disclosure?"; CFPB, "Loan estimate explainer"; CFPB, "Closing disclosure explainer"; Freddie Mac, "What Are Closing Costs and How Much Will I Pay?"; Fannie Mae, "Closing Costs Calculator"

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