Closing Costs Explained: A Line-by-Line Breakdown
Lender fees, third-party fees, prepaids, and what's negotiable.
Closing costs total 2.5-4% of the home's purchase price for buyers — typically $10,000-$16,000 on a $400k home. The Loan Estimate received within 3 days of application breaks them down by category, and several lines are negotiable.
Major cost categories
Lender fees (negotiable): origination fees, application fees, processing fees, underwriting fees. Total: $1,000-$3,000. Comparison shopping with 2-3 lenders routinely reveals $1,000+ in difference here.
Third-party fees (mostly fixed): appraisal ($500-$900), credit report ($25-$75), title search ($200-$500), title insurance ($1,000-$3,000), survey ($300-$700 if required), recording fees ($100-$300).
Prepaids: property tax escrow (3-12 months depending on closing date), homeowners insurance (full year), prepaid interest (days between closing and first payment).
What to negotiate or shop
Shop lenders aggressively — origination fees and rate locks vary significantly. Title insurance: in many states you can shop separately for the title company and pay 30-50% less than the lender's suggested provider.
Seller concessions: in buyer's markets, sellers routinely contribute 1-3% of purchase price toward buyer's closing costs. Always ask.