Closing costs explained: what is negotiable, what is not

Closing costs are the fees and prepaid items due at settlement beyond the down payment. They typically total 2% to 5% of the purchase price — and which end of that range you land on depends heavily on your state and on how carefully you shop.

Where they hide on the Loan Estimate

Page 2 of the Loan Estimate splits costs into sections. Section A (origination charges — lender fees and points) cannot change after the estimate. Section B (services you cannot shop for — appraisal, credit report, flood certification) can rise by no more than 10% in aggregate. Section C (services you can shop for — title insurance, settlement agent, survey) is fully shoppable if you use your own providers. Sections E through G cover government recording fees and transfer taxes, prepaid interest and insurance, and the initial escrow deposit.

Typical line items

Lender fees: origination or underwriting, $0 to $2,000; discount points are optional and buy a lower rate.
Appraisal: $400 to $800 in most markets, more for rural or complex properties.
Title insurance: a lender’s policy (required) and an owner’s policy (optional but wise); who pays varies by state custom.
Settlement or attorney fee: $500 to $1,500; some states require an attorney.
Transfer and recording taxes: from zero in a dozen states to 2% or more in Delaware, Pennsylvania and parts of New York — see your state’s first-time buyer page.
Prepaids: the first year of homeowners insurance, interest from closing to month-end, and two to three months of taxes and insurance to seed the escrow account. These are not fees, but they are cash due at closing.

Who can pay them

Seller concessions: conventional loans allow the seller to pay up to 3% of the price toward your costs with less than 10% down (6% with 10% to 25% down); FHA allows 6%; VA allows 4% plus all customary closing costs. Lender credits: the lender pays some costs in exchange for a higher rate — worth it if you will not keep the loan long. Down payment assistance: many state programs allow funds to cover closing costs, not just the down payment.

How to cut them

Get Loan Estimates from three lenders on the same day and compare Section A. Shop title and settlement services yourself — the lender’s default provider is rarely the cheapest. Close near the end of the month to reduce prepaid interest (a timing trick, not a saving). And read the Closing Disclosure, delivered at least three business days before closing, against the Loan Estimate line by line; the CFPB rules limit how much most fees may increase.

Frequently asked questions

Can closing costs be rolled into the mortgage?

On a purchase, generally not — the loan amount is tied to the price and appraisal. Refinances can finance closing costs. The workarounds on a purchase are seller concessions and lender credits.

What is the difference between closing costs and prepaids?

Closing costs are fees for services and taxes; prepaids are your own future expenses (insurance, taxes, interest) paid in advance. Both are cash at closing, but prepaids would be paid anyway.

Why did my cash to close go up at the Closing Disclosure?

Usually prorations (the seller’s prepaid taxes or HOA dues you reimburse), a changed closing date, or an escrow deposit that was underestimated. Fees in Section A cannot rise; if they did, ask the lender for a corrected disclosure.