You found the house, the offer got accepted, and then the lender hands you a loan estimate with a number that feels like a second down payment.
Closing costs are the fees charged to finalize a mortgage, and they typically run 2% to 6% of the purchase price.
On a $400,000 home, that's $8,000 to $24,000 due on closing day — separate from your down payment.
The fees come from several places at once.
You'll see lender charges like origination and underwriting fees, third-party costs like the appraisal and title search, prepaid items like homeowners insurance and property taxes, and government recording fees.
None of these are one big charge, which is exactly why the total sneaks up on people.
Title insurance alone can cost $1,000 to $2,500 depending on your state and loan size, and you often pay for both a lender's policy and an owner's policy.
Add a year of property taxes upfront, several months of insurance, and daily interest on the loan, and the prepaid section can rival the fee section.
The good news is that some of this is negotiable.
Sellers frequently agree to cover a percentage of closing costs as part of the deal, especially in a slower market.
You can also ask your lender to waive or reduce origination fees, and shopping around for title services and homeowners insurance can save real money.
Your best defense is the Loan Estimate, a three-page form lenders must give you within three business days of applying.
Compare it line by line against the Closing Disclosure, which arrives at least three days before closing.
If a number jumped, ask why in writing before you sign anything.
Watch for what lenders call "junk fees" — courier charges, email fees, or vague processing charges that can add a few hundred dollars.
They're not always illegal, but they're often removable with one phone call.
Ask for an itemized list of every single fee and question anything you don't recognize.
Many states run down payment assistance programs that also cover a chunk of closing costs, and some lenders offer no-closing-cost mortgages that roll the fees into a higher interest rate.
That trade-off can work if you plan to move within a few years.
One number worth knowing: a recent survey of recent buyers found the median closing cost on a single-family home sat around $6,000, and it climbs fast in high-tax states like New York and California.
Budget for the high end of the range, and anything left over becomes moving money.
The bottom line is that closing costs are not a surprise you have to absorb.
They're a list of line items you can read, question, and sometimes shrink.
Final Thoughts
Ask for the estimate early, compare every version, and negotiate before the final papers land on the table.