Closing costs catch most first-time buyers off guard. You saved up your down payment, got approved for a mortgage — then learn you need another $6,000–$15,000 to actually close. Here's what those fees are and how to prepare.
Closing costs typically run 2–5% of the loan amount. On a $350,000 home with 10% down ($315,000 loan), expect $6,300–$15,750. The exact amount depends heavily on your state — transfer taxes alone can add thousands in states like New York, Pennsylvania, and Delaware.
Lender fees include origination charges (0–1% of loan amount), underwriting fees ($400–$900), and credit report fees ($30–$50). These are the most negotiable — always get Loan Estimates from at least 3 lenders and compare line by line.
Third-party fees cover the appraisal ($400–$700), home inspection ($300–$500), title search ($150–$400), and title insurance (0.5–1% of purchase price). Title insurance is required by lenders, but you can shop for your own title company in most states.
Prepaid items aren't really 'costs' — they're advance payments of recurring expenses. Expect to prepay property taxes (2–6 months), homeowners insurance (12 months), and daily mortgage interest from closing day to month-end.
Ways to reduce closing costs: negotiate seller concessions (common in buyer's markets — sellers pay 2–3% of your costs), ask about lender credits (higher rate in exchange for lower closing costs), and explore first-time buyer programs in your state that offer closing cost assistance.