What Are Closing Costs?

Closing costs are the fees and prepaid items you pay to finish buying a home, on top of your down payment. They surprise a lot of buyers, so we like to talk about them early. Here’s what usually shows up.

Where to see your numbers

When you apply for a mortgage, your lender gives you a Loan Estimate within 3 business days. At least 3 business days before closing, you get a Closing Disclosure with the final numbers. Compare the two and ask about anything that changed.

Common closing costs

• Lender fees. Origination or underwriting fees for processing your loan. Each lender sets its own, so it pays to compare Loan Estimates.
• Discount points. Optional. You pay extra up front to lower your interest rate. One point equals 1% of the loan amount.
• Appraisal and credit report. Your lender orders these. Sometimes you pay for them before closing.
• Title charges. The title company’s search, closing (settlement) fee and the lender’s title insurance policy. An owner’s title policy is optional but worth asking about.
• Mortgage insurance. With a smaller down payment, many loans require mortgage insurance. Ask your lender how and when it can be removed.
• Prepaid interest. Interest from your closing date to the end of that month. Closing later in the month means less of it.
• Escrow deposits. Most lenders set up an escrow account to pay your property taxes and homeowners insurance for you. You’ll usually fund a starting balance at closing, and you often pay your first year of homeowners insurance up front.
• Government fees and taxes. County recording fees for your deed and mortgage, and Minnesota’s mortgage registration tax on your loan, which is typically paid by the buyer. (The state deed tax is typically paid by the seller.)

Can you lower them?

Sometimes. You can shop lenders, ask about first-time buyer programs, or negotiate for the seller to pay part of your closing costs in the purchase agreement. Your loan program may limit how much a seller can pay. We’ll help you figure out what makes sense in today’s market.

Want a rough idea for your situation? Ask us, and talk with your lender for exact figures.