Mortgage closing costs: what each fee is
Key takeaways
04 · ideas- Origination fees are the most negotiable of closing costs
- Third-party services like title insurance can be shopped
- Recording fees and transfer taxes are set by government
- No-closing-cost mortgages roll costs into the rate, not eliminate them
Basic level
The essentials · 2 min
Closing costs are fees paid at mortgage closing, separate from the down payment. They typically range from 2-5% of the loan amount.
Lender fees (most negotiable):- Origination fee / loan points
- Underwriting fee
- Application fee
- Title search and title insurance (owner and lender policies)
- Appraisal
- Home inspection
- Attorney or settlement agent fees
- Recording fees
- Transfer taxes (vary widely by state/county)
- Homeowner's insurance premium
- Property tax escrow
- Prepaid mortgage interest
Intermediate level
How it applies · 2 min
The Loan Estimate structure
TILA organizes closing costs into sections:
Section A: Origination charges — set by the lender, negotiable.
Section B: Services you cannot shop for (appraisal, credit report, flood determination).
Section C: Services you can shop for (title search, title insurance, settlement agent). You can request quotes from alternative providers.
Title insurance
Lender's title insurance: Required by the lender; protects the lender's interest. Does not protect the buyer.
Owner's title insurance: Optional; protects the buyer's equity. A one-time premium at closing; coverage continues as long as you own the property.
No-closing-cost mortgages
These do not eliminate costs — they roll them into the loan either as a higher interest rate (lender credit) or a higher loan balance. The total cost depends on how long you hold the loan.
Advanced level
The math, step by step · 1 min
RESPA and anti-kickback provisions
The Real Estate Settlement Procedures Act (RESPA) prohibits kickbacks and referral fees between settlement service providers. RESPA Section 8 violations can result in treble damages and potential criminal penalties.
Affiliated Business Arrangements (AfBAs) are permitted with disclosure but cannot require the consumer to use affiliated providers. The CFPB enforces RESPA and has brought actions against arrangements that violate fee-splitting prohibitions.