Closing costs
Closing costs are what it takes to complete a property transaction, over and above the down payment. They divide into three categories that behave very differently, and treating them as one number is why the total surprises people.
Category one: lender charges#
Origination fees, underwriting fees, points, and anything else the lender charges for making the loan.
These are negotiable, they vary substantially between lenders, and they are the reason two loans at the same rate can cost very different amounts. They also sit in the zero-tolerance category on the Loan Estimate — they generally cannot increase by closing.
Category two: third-party and government charges#
Title search, title insurance, settlement or closing fees, survey, appraisal, recording fees, and state or county transfer taxes.
Some of these are shoppable and some are not. Title-related services frequently have more room in them than buyers assume. Recording fees and transfer taxes are set by government and are simply a number.
In Minnesota that includes deed tax on the conveyance and mortgage registry tax on the loan, both calculated from the transaction rather than negotiated.
Category three: prepaid items#
Homeowners insurance for the first year, the initial escrow deposit, and interest from closing to the end of the month.
These are not fees. They are money you were going to pay anyway, collected at closing rather than later. Reducing them changes the timing rather than the total, which is worth knowing before optimising for a smaller cash-to-close at the cost of a thin escrow account that produces a shortage six months later.
Seller credits#
A seller contribution toward closing costs is standard and is often easier to negotiate than an equivalent price reduction — the price supports the appraisal while the credit reduces what the buyer must bring.
Loan programmes cap how much a seller may contribute, and the caps vary by programme and by down payment size. Exceeding the cap does not simply get allowed; the excess is disregarded.
Where to see the real number#
The Loan Estimate, within three business days of application, and the Closing Disclosure at least three business days before closing.
Compare them line by line. That comparison is the only structured moment in the whole transaction where an unexplained increase can still be challenged with leverage, and it exists for exactly that purpose.
Cash to close is not the same number#
Closing costs and cash to close get used interchangeably and are different figures.
Closing costs are the fees and prepaid items.
Cash to close is closing costs, plus the down payment, minus the earnest money already deposited, minus any seller credits or lender credits.
That final number is the one to plan around, and it appears on both the Loan Estimate and the Closing Disclosure. Confirm it early rather than the night before, because it dictates the wire — and wire timing is now the most common cause of a delayed closing.
Confirm wire instructions by telephone using a number you looked up yourself, never one supplied in an email. Real estate wire fraud is organised, common and effectively unrecoverable.