You’ve found the perfect home, your offer has been accepted, and your loan is approved. Now, you’re excited to move in—but before that happens, there’s one final step: closing.

Also known as settlement, closing is the process where ownership officially transfers from the seller to the buyer. This stage can feel overwhelming, as it involves signing numerous documents and covering various fees. Many buyers unknowingly pay thousands in closing costs without fully understanding where their money is going. Being informed about these costs can help you prepare financially and even negotiate with the seller.

Common Closing Costs You Should Know

While closing fees vary depending on location and lender, here are some typical costs buyers should be aware of:

• Appraisal Fee – Covers the property appraisal to determine its fair market value. This may have been paid during your loan application.

• Credit Report Fee – Pays for the lender’s review of your credit history, often charged upfront.

• Loan Origination Fee – Covers administrative costs for processing your mortgage, typically around 1% of the total loan amount.

• Loan Discount (Points) – A one-time fee paid if you choose to buy down your interest rate. Each point equals 1% of your total loan.

• Title Insurance & Fees – Includes costs for title search, examination, insurance, and document preparation to protect against ownership disputes.

• Private Mortgage Insurance (PMI) – If your down payment is below 20%, lenders may require PMI to protect against default. Once you’ve built 20% equity, you can typically request cancellation.

• Prepaid Interest – Covers interest from your closing date to the start of your first mortgage payment. Buying earlier in the month means higher prepaid interest, while closing later reduces this cost.

• Escrow Accounts – In some areas, lenders require an escrow account to cover property taxes and homeowner’s insurance. Expect to prepay at least a year’s worth of insurance plus a few months of property taxes at closing.

• Recording Fees & Transfer Taxes – Charged by local governments for officially recording your home purchase and transferring ownership to your name.

Plan Ahead & Negotiate Closing Costs

Before closing, consult a real estate professional to get a clear breakdown of the fees specific to your area. Keep in mind that some costs can be negotiated with the seller during the offer stage. In certain cases, sellers may even agree to cover part or all of the closing costs. Being well-prepared ensures a smoother closing experience and prevents unexpected financial surprises.