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Costs

Closing Costs

Closing costs are the fees you pay to finalize your home purchase, on top of your down payment. They include lender fees, title and escrow charges, an appraisal, and prepaid items like taxes and insurance. Closing costs commonly run roughly 2% to 5% of the purchase price, though it varies by location and loan.

Closing costs bundle together several different charges. Some go to your lender, like origination fees. Others go to third parties for things like title insurance, recording, and the appraisal. A chunk is often prepaid items, where you fund the first stretch of property taxes and homeowners insurance up front so your escrow account starts with a cushion.

Your total cash to close is usually your closing costs plus your down payment, minus any credits. Sellers can sometimes offer credits, and lenders can cover costs in exchange for a slightly different rate. You’ll see exact numbers on your official disclosures, and I’ll walk you through them line by line. You can ballpark yours with my closing cost calculator.

Related terms

Escrow

Escrow has two meanings in a home purchase. Before closing, it's a neutral account that holds your earnest money and documents. After closing, an escrow account is where your lender collects part of your payment each month to pay property taxes and insurance for you when they come due.

Earnest Money

Earnest money is a good-faith deposit you put down when your offer is accepted, showing the seller you're serious. It's usually held in escrow and applied toward your down payment or closing costs at closing. If the deal falls through for a reason your contract protects, you can often get it back.

APR

APR, or annual percentage rate, is the yearly cost of your loan including certain fees, not just the interest rate. Because it folds in some closing costs, the APR is usually a bit higher than your rate. It's meant to help you compare loan offers on a more apples-to-apples basis.

Last updated: June 5, 2026

This definition is educational and isn't an offer to lend or financial advice. Rates, programs, and guidelines may change without notice. All loans are subject to credit and property approval.

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