Closing Costs Explained: What to Expect and How to Prepare

What Are Closing Costs?

Closing costs are the fees and expenses you pay when finalizing your mortgage, beyond the down payment. They typically range from 2-5% of the loan amount and are paid at the closing table (or sometimes rolled into the loan).

Common Closing Cost Items

• Loan Origination Fee: 0.5-1% of the loan amount, charged by the lender for processing your loan
• Appraisal Fee: $400-$700 for a professional property valuation
• Title Insurance: $500-$2,000 to protect against title defects
• Title Search: $200-$400 to verify the property's ownership history
• Attorney Fees: Varies by state, some states require an attorney at closing
• Recording Fees: $50-$250 to record the deed with the county
• Prepaid Items: Property taxes, homeowner's insurance, and prepaid interest
• Escrow Deposits: Initial deposits for your tax and insurance escrow account
• Credit Report Fee: $25-$50 per borrower
• Flood Certification: $15-$25 to determine flood zone status

How to Reduce Closing Costs

• Shop Around: Compare Loan Estimates from multiple lenders (Lumina does this automatically)
• Negotiate with the Seller: Ask for seller concessions to cover some or all closing costs
• Look for No-Closing-Cost Options: Some lenders offer this in exchange for a slightly higher rate
• Close at End of Month: This reduces the prepaid interest you owe at closing
• Ask About Lender Credits: Some lenders offer credits that offset closing costs

The Loan Estimate

Within 3 business days of applying for a mortgage, you'll receive a Loan Estimate — a standardized document that breaks down all expected costs. Review it carefully and compare estimates from different lenders. With Lumina, you can easily compare these costs across multiple offers in your dashboard.