How much are closing costs on a house?

Closing costs are the fees and prepaid bills you pay to get a mortgage and transfer the home to you, on top of your down payment. Your exact figure is on page 2 of your Loan Estimate, and in the example below they come to $9,816 on a $315,000 loan.

They come in a few groups

Closing costs include origination and lender charges, points if you choose them, third-party services like an appraisal and title insurance, government fees, and prepaid items such as interest, homeowners insurance and an initial escrow deposit.

Two forms show the numbers

The lender must send a Loan Estimate within three business days of your application and a Closing Disclosure at least three business days before closing. Compare the two line by line.

Some costs are capped and some are not

Fees paid to the lender can't go up at all without a change in circumstances. Recording fees and some third-party fees can rise up to 10% in total. Prepaid interest, insurance and escrow deposits can change by any amount.

No-closing-cost loans still cost money

A loan sold as having no closing costs either charges a higher interest rate to cover them or adds them to your loan amount. You pay either way, just over time.

What closing costs include

Origination charges are what the lender charges to make the loan. They may be called an application, underwriting or processing fee. The labels differ between lenders, but the total is what matters.

Points are an optional fee to lower your interest rate. One point is 1% of the loan amount, so one point on a $315,000 loan is $3,150. Points appear on page 2 of the Loan Estimate, in section A, next to origination charges.

Third-party services are things the lender requires but someone else provides, such as the appraisal, a credit report, title services and the lender's title insurance. Government fees cover recording the deed and mortgage, plus any transfer taxes your state or city charges.

Prepaid items are bills you pay in advance at closing. These usually include interest from your closing day to the end of that month, the first year of homeowners insurance and an initial deposit into your escrow account for future taxes and insurance.

Why your number depends on where you live

Transfer taxes, recording fees and title insurance rates vary a lot by state and county. Property tax also drives the size of your escrow deposit. Two buyers with the same loan can have very different closing costs in different places.

For that reason, a single national percentage is a weak guide. Use the real figures on your Loan Estimate. Before you apply, ask a local lender or your agent what buyers in your area usually pay.

Which costs can change before closing

Federal rules sort closing costs into three groups. Fees paid to the lender or its affiliate for required services can't increase at all. Recording fees and required services from a provider on the lender's list can rise, but by no more than 10% in total. Prepaid interest, insurance premiums, escrow deposits and services you shopped for on your own can change by any amount.

These limits don't apply after a change in circumstances, like a new loan type, a different down payment, a low appraisal or a change in your credit. You would get a revised Loan Estimate. If costs rise past the limits without a change in circumstances, you are owed a refund of the extra.

How to lower your closing costs

Compare origination charges and Services You Cannot Shop For across several Loan Estimates. Shop the services the lender lets you choose, especially title and settlement services.

You can also trade cost for rate. Lender credits lower what you pay at closing in exchange for a higher interest rate. That can help if cash is tight, but you pay more each month for as long as you keep the loan.

In some markets, sellers agree to pay part of the buyer's closing costs. Ask your agent whether that is realistic for the home you want. Some state and local homebuyer programs also help with closing costs, so check your state housing agency.

The last three days before closing

Your Closing Disclosure arrives at least three business days before closing. Use that time to compare it with your Loan Estimate. Check the rate, the loan amount, the monthly payment and each fee. Ask the lender about anything that changed.

You will usually pay your cash to close with a cashier's check or a wire transfer. Before you wire, confirm the instructions by phone with your settlement agent, using a number you found yourself. Scammers target buyers in exactly these days.