Closing costs typically range from 2% to 5% of the loan amount. On a $300,000 loan, that's $6,000 to $15,000 due at the closing table, in addition to your down payment. When you receive your Loan Estimate (LE), it looks like a wall of confusing fees. This guide translates that document into plain English and shows you where you can save money.
Section A: Origination Charges (The Lender's Fees)
These are the fees the lender charges to process, underwrite, and fund your loan. This includes application fees, underwriting fees, and 'points' (paying upfront to lower your interest rate). You cannot shop for these services once you choose a lender, but you *can* negotiate them or ask the lender to waive them before you commit.
Important
The 'No Closing Cost' Myth
If a lender offers a 'no closing cost' loan, they are simply rolling those fees into your loan balance or charging you a higher interest rate. You always pay them eventually.
Section B & C: Services You Cannot and Can Shop For
Section B includes services required by the lender that you cannot shop for, such as the appraisal fee ($400-$600) and credit report fee ($30-$50). Section C is where you save money. It lists services you *can* shop for, primarily Title Services and Title Insurance. The lender will provide a list of providers, but you are free to find your own title company, which can save you hundreds of dollars.
Closing Cost Shopping Checklist
- ○Compare Origination Fees across 3 different lenders.
- ○Call 3 local Title Companies to compare Title Search and Settlement fees.
- ○Get quotes from 3 different Homeowners Insurance providers.
- ○Ask the seller to pay for the Owner's Title Insurance policy (customary in some states).
Section E, F, G: Taxes and Prepaids
These are not fees paid to the lender or title company; they are your own future expenses collected upfront. This includes prepaying your first year of homeowners insurance, property taxes, and setting up your escrow account. You cannot negotiate these amounts, as they are determined by the government and your insurance provider.