💡 Key takeaways
- Closing costs are the fees and prepaid items due when you close on a home loan.
- The Loan Estimate lists them within three business days of applying; the Closing Disclosure should arrive at least three business days before closing.
- You can shop for some services (such as title) and not others (such as the appraisal ordered by the lender).
- Compare the Closing Disclosure against your Loan Estimate.
What they are
Closing costs are the fees and prepaid items due when you close on a home loan. They are itemized on the Loan Estimate you receive within three business days of applying, and finalized on the Closing Disclosure you should receive at least three business days before closing.
Main categories on the Loan Estimate
- Origination charges: what the lender charges to make the loan (may include points).
- Services you cannot shop for: items the lender chooses, such as an appraisal.
- Services you can shop for: such as title services and pest inspection — you can choose different providers.
- Taxes and other government fees: recording fees and transfer taxes.
- Prepaids and initial escrow: items such as homeowners insurance and property taxes paid in advance.
How to reduce or compare them
Compare the Loan Estimates from several lenders, shop for the services you are allowed to shop for, and ask about lender credits. Compare the Closing Disclosure against your Loan Estimate; see our guide to understanding your Loan Estimate.
Who pays what
Some costs are paid by the buyer, some by the seller and some are split depending on the contract and local custom. Ask your lender and agent which costs apply to you; the Closing Disclosure shows the split.
A checklist for closing week
- Compare the Closing Disclosure with your Loan Estimate line by line.
- Ask about any fee that increased and why.
- Confirm the cash needed to close and how to send it securely.
- Do a final walkthrough before signing.
Ways to reduce closing costs
Compare lenders, shop for services you are allowed to shop for, ask about lender credits (in exchange for a higher rate; see points and credits) and ask the seller to contribute where the contract allows.
🔤 Key terms
| Term | Meaning |
|---|---|
| Origination charges | What the lender charges to make the loan, which may include points |
| Title services | Search, insurance and settlement work to make sure the seller can transfer clear ownership |
| Prepaids | Insurance and property taxes paid in advance at closing |
| Escrow deposit | An initial amount placed in your escrow account |
| Cash to close | Down payment plus closing costs minus credits |
Timeline: from application to closing
- Apply and receive the Loan Estimate within three business days.
- Shop for the services you are allowed to shop for.
- Receive the Closing Disclosure at least three business days before closing.
- Compare it to your Loan Estimate and ask questions.
- Close, sign and receive keys.
⚠️ Common mistakes to avoid
- Comparing only interest rates and ignoring fees on the Loan Estimate.
- Not shopping for the services you can shop for.
- Skipping the comparison of the Closing Disclosure to the Loan Estimate.
- Forgetting prepaid items and escrow deposits when planning cash needed.
- Wiring money to an address you have not verified.
🛠️ Try it yourself
❓ Frequently asked questions
When do I receive the Loan Estimate?
Within three business days after you apply.
When do I receive the Closing Disclosure?
At least three business days before closing.
Can I negotiate closing costs?
Some, yes: shop for allowed services, compare lenders and ask about credits.
What are prepaids?
Items such as homeowners insurance and property taxes paid in advance, along with initial escrow deposits.
Can closing costs be rolled into the loan?
Sometimes, depending on the loan and lender; it changes your balance and interest.
What if the Closing Disclosure differs from the Loan Estimate?
Ask your lender to explain each difference before you sign.
📚 Sources
This guide is general information, not financial, tax or legal advice. Rules and limits change; confirm with the sources above or a licensed professional.