What Are Closing Costs?
Closing costs are fees and expenses paid at the closing of a real estate transaction — the moment the home officially transfers to you. They're separate from your down payment and typically range from 2–5% of the purchase price. On a $200,000 home, that's $4,000–$10,000 in addition to your down payment.
Common Closing Cost Line Items
| Fee | Typical Range | Who Pays |
|---|---|---|
| Loan origination fee | 0.5–1% of loan | Buyer |
| Appraisal | $400–$700 | Buyer |
| Home inspection | $300–$600 | Buyer |
| Title search & title insurance | $500–$1,500 | Varies |
| Recording fees | $100–$300 | Buyer |
| Prepaid interest (days until first payment) | Varies | Buyer |
| Homeowner's insurance (first year) | $800–$2,000 | Buyer |
| Property tax escrow (2–3 months) | Varies by location | Buyer |
| Real estate agent commission | 2.5–3% (buyer's agent) | Historically seller; evolving |
What's Negotiable
- Seller concessions: In a buyer's market, sellers may agree to pay some or all of your closing costs as part of the purchase negotiation
- Lender fees: Origination fees, application fees, and points can sometimes be negotiated — especially if you have competing loan offers
- Title company: You typically have the right to shop for title insurance in most states — compare prices
- "No-closing-cost" loans: Some lenders offer loans with no upfront closing costs — but costs are rolled into a higher interest rate. May make sense if you'll sell or refinance within a few years
The Loan Estimate
Within three business days of applying for a mortgage, lenders must provide a Loan Estimate (LE) — a standardized 3-page document outlining estimated closing costs. Use this to compare offers from multiple lenders. The final Closing Disclosure (issued 3 days before closing) should closely match the LE — significant changes are a red flag.
Budget rule: Save 2–3% of your target purchase price for closing costs, separate from your down payment. In expensive markets or with smaller down payments (FHA), plan for the higher end of the range.
Closing costs vary significantly by state, loan type, and transaction. This article provides general educational information. Contact KCCU for current mortgage products and closing cost estimates.