What Are Closing Costs and How Much Will I Pay? (2024)

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When you buy or refinance a home, you will need to budget for closing costs. Mortgage closing costs are fees and expenses you pay when you secure a loan for your home, beyond the down payment. These costs are generally 3 to 5 percent of the loan amount and may include title insurance, attorney fees, appraisals, taxes and more. Here is a quick look at some of the main closing costs.

What do you pay at closing?

Loan origination fees

These include fees for processing and underwriting the loan and typically run about 0.5 to 1 percent of the loan. Underwriting is part of the loan approval process, when the lender checks to see if you’re able to repay your loan based on many factors including credit history.

Appraisal and survey fees

The appraisal and survey are used to help confirm the fair market value of your home. Fees for these services may vary but are usually several hundred dollars.

Title insurance

Policies that ensure the property can be transferred legally cover both the buyer and lender. They are calculated based on the purchase price.

Homeowners insurance

The first year is generally paid at closing.

Private mortgage insurance (PMI)

If your down payment is less than 20 percent, you may need to pay private mortgage insurance, which protects the lender against losses if you cannot repay your loan.

Mortgage points

Also known as discount points, mortgage points are paid directly to the lender at closing in exchange for a lower interest rate on your mortgage.

Property tax

Usually, six months of advance tax is paid at closing. Taxes vary by location. Keep in mind: After the loan closes, the property may be reassessed, and the value could increase along with the real estate tax. Escrow amounts may also need to be readjusted to ensure there is enough to pay for any tax increases.

Closing or escrow fee

This fee goes to the escrow agent who helps you close. While it can vary based on the escrow company you use and the home’s location, the fee is typically between 1 percent and 2 percent of the sale price.

Attorney fees

Some states require you to have an attorney. Their fees may be bundled into your closing costs or paid separately as a flat fee.

Miscellaneous fees

Several smaller fees may also be included at closing, from the cost of a $30 to $50 credit report to the cost of registering your purchase with the local government.

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Homeownership articles

• What happens at closing? Read more,3minutes
• What are mortgage points? Read more,2minutes
• What is private mortgage insurance (PMI)? Read more,3minutes

How to estimate closing costs

Once you submit a mortgage application, your lender is required by law to give you a Loan Estimate (LE) within a few days. If you have questions or something doesn’t add up in your LE, ask your lender or attorney right away. You want to avoid surprises.

Prior to closing your loan, you’ll receive your final Closing Disclosure listing your closing costs. Be sure to compare your Closing Disclosure to the LE you received when you applied for your loan. Generally, you’ll be asked to pay via cashier’s check.