Fees and expenses paid at closing beyond the down payment, typically 2–5% of the loan amount.
Full Definition
Closing costs encompass all the fees required to finalize a mortgage transaction. They fall into two categories: lender fees (origination fee, underwriting fee, discount points) and third-party fees (appraisal, title search, title insurance, escrow fee, recording fee, survey). Buyers also typically prepay interest for the remainder of the month, and initial escrow deposits for property taxes and insurance. Total closing costs average 2–5% of the loan amount, though they vary by location — some states have higher transfer taxes or attorney requirements. Sellers sometimes agree to cover a portion of buyer closing costs (seller concessions), and lenders may offer lender credits in exchange for a slightly higher rate.
Related Terms
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