1. What Are Closing Costs?

Closing costs are fees paid at the closing of a real estate transaction. They typically range from 2% to 5% of the loan amount and include various lender fees, third-party fees, and prepaid expenses.

2. How Closing Costs Are Calculated

The calculator uses this simple formula:

Explanation: Each component represents a different category of fees you'll encounter when closing on a home.

3. Typical Closing Cost Components

Lender Fees: Origination fees, underwriting fees, application fees
Title Fees: Title search, title insurance, settlement fees
Appraisal: Property valuation fee
Taxes: Property taxes, transfer taxes
Other Fees: Home inspection, recording fees, prepaid interest

4. Using the Calculator

Tips: Enter all fee amounts in dollars. If you're unsure about certain fees, check your Loan Estimate form or ask your lender for estimates.

5. Frequently Asked Questions (FAQ)

Q1: Can closing costs be rolled into the mortgage?
A: Sometimes, but this increases your loan amount and total interest paid over time.

Q2: Are closing costs negotiable?
A: Some fees are negotiable, while others (like government recording fees) are fixed.

Q3: Who pays closing costs - buyer or seller?
A: Typically the buyer pays most closing costs, but some may be negotiated to be paid by the seller.

Q4: When will I know the exact closing costs?
A: You'll receive a Loan Estimate within 3 days of applying and a Closing Disclosure 3 days before closing.

Q5: How can I reduce closing costs?
A: Shop around for services, negotiate lender fees, and look for first-time homebuyer programs.