Closing costs, explained

The short version

The down payment isn't all the cash a purchase needs. Closing costs and prepaid items are due at closing too. Earnest money you've already paid counts toward the cash needed at closing.

What closing costs are

Closing costs come in three groups.

• Lender charges: origination, and any points.
• Third-party services, such as the appraisal, title, settlement, a survey and the credit report.
• Government taxes and fees, such as Georgia's intangible recording tax and Florida's documentary stamp and intangible taxes.

Prepaid items

Prepaid items are costs paid ahead at closing, separate from the charges above.

• Interest from closing to the end of that month
• The first homeowners insurance premium
• The first deposit into the escrow account

Some you can shop for

Some services can be shopped and some can't, and the Loan Estimate says which.

The total isn't a fixed amount. It varies with the loan, the property, the county, and where in the month you close.

Who pays which

Who pays which cost is set by the contract and local custom, and custom differs between counties.

Credits move cost

A seller credit or a lender credit can cover some closing costs. A seller credit is agreed in the contract, within limits the loan program sets. A lender credit usually comes with a higher rate, so you bring less to closing and pay a little more each month.

A credit changes who pays a cost, or when. It doesn't make the cost go away.

The Consumer Financial Protection Bureau explains the Loan Estimate and the Closing Disclosure, the two forms where these costs are listed, on its own pages.

• CFPB: Loan Estimate explainer
• CFPB: Closing Disclosure explainer

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