Closing costs catch a lot of first-time buyers off guard. You spend months saving for a down payment, then a week before closing you get a list of fees that can add up to several thousand dollars. Understanding what those costs cover — and which ones you can negotiate — puts you in a much stronger position at the closing table.
Before you go under contract, compare lenders to see who charges the lowest origination fees and third-party service costs. LendingTree lets you see competing mortgage offers side by side, so you can spot the best deal before you commit.
What Are Closing Costs?
Closing costs are the fees and expenses you pay on the day you take ownership of a home. They are separate from your down payment. On average, first-time buyers in the U.S. pay between 2% and 5% of the loan amount in closing costs. On a $300,000 mortgage, that is $6,000 to $15,000.
Some costs go to the lender, some go to third-party service providers, and some are prepaid expenses like property taxes and homeowner’s insurance. Here is a breakdown of the most common line items.
Lender Fees
These are the fees charged by the mortgage lender:
- Origination fee: Covers the lender’s cost to process your loan. Typically 0.5% to 1% of the loan amount. Some lenders, like Better.com, charge no origination fee.
- Discount points: Optional prepaid interest to lower your rate. One point equals 1% of the loan amount and typically reduces your rate by about 0.25%.
- Underwriting fee: The cost to evaluate your loan application. Usually $300 to $900.
- Rate lock fee: Some lenders charge to lock your interest rate. Others do not — ask upfront.
Third-Party Service Fees
These are paid to outside providers, not the lender:
- Appraisal fee: A licensed appraiser confirms the home’s value. Typically $300 to $500. Required by nearly all lenders.
- Title search and title insurance: The title company checks for liens or ownership disputes on the property. Title insurance protects you (owner’s policy) and the lender (lender’s policy). Combined cost is often $700 to $1,500 depending on your state.
- Home inspection: Not always required by lenders, but strongly recommended. A general inspection costs $300 to $500. Specialty inspections (pest, roof, sewer) are extra. Learn more in our complete first-time home buyer guide.
- Survey fee: Confirms property boundaries. Required in some states. Usually $300 to $700.
- Attorney fees: Some states require a real estate attorney at closing. Fees vary widely.
Prepaid Expenses and Escrow Deposits
These are not fees — they are expenses paid in advance or held in escrow:
- Prepaid homeowner’s insurance: Most lenders require the first year’s premium paid at closing. The average U.S. homeowner pays about $1,400 per year.
- Prepaid property taxes: You may need to deposit several months of property taxes into an escrow account at closing.
- Prepaid interest: Interest that accrues from the closing date to the end of that month. If you close on the 15th, you prepay 15 days of interest.
- PMI deposit: If your down payment is less than 20%, you may need to deposit two months of private mortgage insurance (PMI) premiums upfront.
Government and Recording Fees
- Transfer taxes: Charged by the state, county, or city to transfer ownership. Rates vary significantly by location — some states charge no transfer tax, others charge 2% or more.
- Recording fees: The county charges a fee to record the deed and mortgage. Usually $50 to $250.
How Much Should You Budget?
A good rule of thumb is to budget 3% of the purchase price for closing costs if you are getting a conventional loan, and 4% if you are getting an FHA loan (FHA has higher upfront mortgage insurance costs). For a $250,000 home, that means setting aside $7,500 to $10,000 on top of your down payment.
Your lender is required to give you a Loan Estimate within three business days of your application. Review it carefully. Compare your Loan Estimate from each lender — fees vary significantly. Using Rocket Mortgage or another lender with a transparent online process makes it easier to review and compare line-item costs before choosing.
Compare Lenders to Minimize Closing Costs
| Lender | Best For | Min Credit Score | Min Down Payment | Notable Feature |
|---|---|---|---|---|
| LendingTree | Comparing multiple offers | 580 (FHA) / 620 (conventional) | 3.5% (FHA) / 3% (conventional) | See rates from up to 5 lenders at once |
| Rocket Mortgage | Fast digital process | 580 (FHA) / 620 (conventional) | 3.5% (FHA) / 3% (conventional) | Fully online application, fast closings |
| Better.com | Low fees | 620 | 3% | No lender fees or commissions |
| New American Funding | Flexible credit situations | 580 | 3.5% | Manual underwriting available |
Ways to Reduce Closing Costs
Negotiate with the Seller
In a buyer’s market, you can ask the seller to cover some or all of your closing costs as part of your offer. This is called “seller concessions.” FHA loans allow up to 6% in seller concessions. Conventional loans allow up to 3% on a down payment under 10%, and up to 6% with a larger down payment.
Shop Third-Party Services
Your lender is required to let you shop for your own title company, settlement agent, and some other services. Prices vary — get at least two quotes for title insurance.
Ask About Lender Credits
You can sometimes accept a slightly higher interest rate in exchange for the lender covering part of your closing costs (lender credits). This can make sense if you plan to sell or refinance within a few years. Better.com and similar lenders often have flexible credit options worth exploring.
Roll Costs Into the Loan
On some loan types, you can roll closing costs into the loan balance. This increases your monthly payment but reduces the cash needed upfront. Ask your lender about this option.
Closing Cost Assistance Programs
Many states and local governments offer first-time buyer programs that provide grants or forgivable loans for closing costs. Check your state housing finance agency’s website. Some programs from New American Funding are also designed to help buyers cover upfront costs — ask a loan officer what is available in your area.
The Closing Disclosure: Your Final Numbers
Three business days before closing, you will receive a Closing Disclosure. This is the final accounting of every fee you will pay. Compare it line by line with your Loan Estimate. By law, certain fees (like lender fees) cannot increase from the Loan Estimate. Others can change within limits.
If anything looks different or new, ask your lender to explain it before closing day. Do not sign until you understand every line.
What to Bring to Closing
- Cashier’s check or wire transfer confirmation for the closing amount
- Government-issued photo ID
- Any outstanding documents your lender requested
Closing day is the finish line — but it is only painless if you have prepared. Start by understanding your full cost picture early. Compare multiple lenders on LendingTree to find the lowest fees and rate for your situation.
For more on the full homebuying process, see our complete first-time home buyer guide for 2026 and our article on how to get pre-approved for a mortgage.