💰 What Are Closing Costs? (And What You Should Know Before You Buy)

By Luke Grasso | NMLS #2638025

When you’re getting ready to close on your new home, you’ll hear a lot about something called closing costs. They might not be as exciting as picking out countertops or choosing your backyard view, but they’re a critical part of your budget—and it’s important to understand what they cover and how much to expect.Let’s break it down. 👇

🔍 What Are Closing Costs?

Closing costs are the fees and expenses you’ll need to pay when you finalize your home purchase or refinance. These are separate from your down payment, and they typically range from 2% to 5% of the loan amount.So, on a $500,000 home, you might expect to pay between $10,000 and $25,000 in closing costs. It depends on the type of loan, your location, and your specific lender or transaction.

🧾 What’s Included in Closing Costs?

Here’s a list of the most common items that make up your total closing costs:🔹 Loan Origination Fees – Charged by the lender for processing your loan.

🔹 Appraisal Fee – Covers the cost of hiring a professional appraiser to determine the value of the home.

🔹 Credit Report Fee – Covers pulling your credit report during the approval process.

🔹 Title Search & Title Insurance – Ensures the seller legally owns the home and protects you against title-related issues.

🔹 Recording Fees – Paid to the local government to record the sale and make it official.

🔹 Underwriting & Processing Fees – Charged by the lender to evaluate your financial profile.

🔹 Prepaid Costs – Includes property taxes, homeowners insurance, and mortgage interest paid up front.

🔹 Escrow Fees – Charged by the title or escrow company for handling the transaction.Depending on your loan and location, you might see other items, but these are the heavy hitters.

💡 Can I Reduce or Negotiate My Closing Costs?

Yes! Here are a few tips:✅ Ask your lender for a Loan Estimate (LE) early in the process. It gives a clear breakdown of expected fees.

✅ Compare lender fees between different mortgage providers. Some may offer lower origination costs or waive certain fees.

✅ Negotiate with the seller: In some markets, it’s common for sellers to agree to pay part of the buyer’s closing costs (this is called a “seller concession”).

✅ Watch for lender credits: Some mortgage brokers may offer credits in exchange for slightly higher rates—just make sure the tradeoff makes financial sense long-term.

🏁 When Are Closing Costs Paid?

Closing costs are typically paid at the closing table, right before the loan funds and the home officially becomes yours. They’re detailed in your Closing Disclosure, which you’ll receive at least 3 business days before closing.

🧠 Final Thoughts

Understanding closing costs upfront helps you avoid surprises—and keeps your homebuying experience smooth and stress-free. Working with a knowledgeable mortgage professional means you’ll know what to expect, how to prepare, and how to possibly reduce your costs.

Luke Grasso Mortgage Solutions

NMLS #2638025 | Proudly Serving California Buyers

🛠️ Helping you make smart mortgage moves with clarity and confidence.

📌 Source: Some information adapted from Motto Mortgage, where Luke Grasso proudly works as a mortgage professional.