What are mortgage closing costs?

Closing costs are fees due at settlement when you finalize a mortgage — typically 2%–5% of the loan amount. They cover lender origination fees, title insurance, appraisal, prepaid taxes, and more. They are separate from your down payment.

Closing costs are the fees and prepaid expenses you pay on the day you finalize your home purchase or refinance. They cover the cost of processing, verifying, and insuring your loan — and they are completely separate from your down payment.

What closing costs include

Origination fees — What the lender charges to process the loan; may include discount points if you buy down your rate.
Appraisal fee — An independent estimate of the home's market value, required by virtually all lenders.
Title insurance and title search — Protects the lender (and optionally you) against title defects or prior claims on the property.
Credit report fee — Covers the cost of pulling your credit history.
Government recording fees and transfer taxes — Local/state fees to officially record the new deed and mortgage.
Prepaid expenses — Property taxes (often 2–3 months upfront), homeowners insurance (first year), and prepaid mortgage interest from closing day to month end.
Escrow setup (impound account) — Initial deposits into your escrow account for ongoing tax and insurance payments.

How much closing costs typically run

The CFPB reports that closing costs typically range from 2% to 5% of the loan amount. On a $300,000 mortgage that's $6,000–$15,000. Costs vary by location, loan type, lender, and the specific services required.

How to reduce or offset closing costs

Seller concessions — Negotiate for the seller to cover part of your closing costs. The seller often raises the purchase price to offset the credit.
Lender credits — The lender covers some costs in exchange for a higher interest rate.
Shop third-party services — You can typically shop for your own title company, attorney, and settlement agent; comparing quotes can save hundreds.
Down payment assistance programs — Many state and local programs also cover a portion of closing costs for eligible buyers.

Key facts

Closing costs typically range from 2% to 5% of the home purchase price, not including the down payment. — CFPB — Figure Out How Much You Want to Spend
From 2021 to 2023, median total loan costs for home purchase mortgages rose more than 36%. — CFPB — Mortgage Report on Closing Costs
The largest categories of closing costs are lender origination fees (including discount points) and title-related fees (title insurance, title search, settlement fees). — CFPB — Closing Costs Inquiry

Key takeaways

Closing costs run 2%–5% of the loan amount and are paid at settlement, on top of your down payment.
Major line items: origination fees, title insurance, appraisal, prepaid property taxes and insurance.
You can shop for many third-party services (title, settlement) — comparing quotes lowers your total.
Seller concessions and lender credits can offset closing costs, but usually come with trade-offs.
Your lender is required by law to give you a Loan Estimate within 3 business days of application, itemizing estimated costs.