Closing costs explained

The down payment is only one part of the cash required to buy a home. Closing costs combine financing charges, settlement services, government charges, and amounts paid in advance.

Loan and lender charges

Origination, underwriting, processing, credit, and discount-point charges relate to arranging the mortgage. Compare these on official Loan Estimates because labels and pricing structures differ by lender.

Third-party services

Appraisal, title search, title insurance, settlement, recording, survey, and inspection-related charges may be paid to outside providers. Some services can be shopped; others are selected by the lender or governed locally.

Prepaids and escrow

Homeowners insurance, daily interest, property taxes, and escrow reserves are often collected at closing. These are not always fees in the economic sense, but they still increase cash needed that day.

Credits and cash to close

Seller or lender credits can offset eligible costs, usually in exchange for negotiated price terms or a higher rate. Credits are restricted by loan rules and generally cannot become cash back beyond permitted amounts.

Primary source

Consumer Financial Protection Bureau: closing on a mortgage