Understanding Closing Costs

What Are Closing Costs?

Closing costs are the fees and expenses you pay when you finalize a mortgage loan — whether it's a purchase or refinance. They typically range from 2% to 5% of the loan amount and cover a variety of services including appraisals, title insurance, lender fees, and government recording fees.

Common Closing Cost Items

• Loan Origination Fee: 0.5%–1% of the loan amount — the lender's fee for processing and underwriting
• Appraisal Fee: $400–$700 — required to determine the property's market value
• Title Insurance: $500–$2,000 — protects against ownership disputes
• Title Search & Settlement: $300–$600 — verifies clear title ownership
• Credit Report Fee: $50–$100
• Recording Fees: $50–$250 — government fees for recording the deed and mortgage
• Escrow / Prepaid Items: 2–14 months of property taxes and insurance collected upfront
• Prepaid Interest: Per-diem interest from closing to the end of the month
• HOA Transfer Fee: Varies — if applicable
• Survey Fee: $150–$400 — if required by the lender or state

Who Pays Closing Costs?

Both buyers and sellers have closing costs, but they pay different items:

• Buyer typically pays: Loan origination, appraisal, credit report, escrow/prepaids, title insurance (lender's policy)
• Seller typically pays: Real estate commissions, owner's title insurance, transfer taxes
• Negotiable: Many costs are negotiable between buyer and seller — seller concessions can cover a portion of buyer closing costs

Seller Concession Limits

• Conventional (owner-occupied): Up to 3% (less than 10% down), 6% (10-25% down), or 9% (25%+ down)
• FHA: Up to 6%
• VA: Up to 4%
• Investment Property: Up to 2%

How to Reduce Closing Costs

1. Negotiate seller concessions — Ask the seller to credit you toward closing costs
2. Shop lender fees — As a broker, Airus Lending comparison-shops across multiple lenders for you
3. Choose a no-closing-cost option — Roll costs into a slightly higher rate
4. Ask about lender credits — Some rate options include credits toward closing costs
5. Check for first-time buyer programs — Many offer closing cost assistance