What Are Closing Costs?

The short definition

Closing costs are the fees required to finalize your mortgage and complete the home purchase — separate from, and in addition to, your down payment. They typically run about 2–5% of the purchase price.

What's usually included

• Loan origination and application fees
• Appraisal and inspection fees
• Title insurance and title search fees
• Attorney or settlement fees, depending on your state
• Prepaid items like the first year of homeowners insurance or initial escrow deposits

Why it matters

It's easy to budget for a down payment and forget closing costs entirely. Both need to be part of your savings target — see the down payment calculator, which includes an option to factor closing costs in.

Related terms

Escrow · Title Insurance