Closing Costs Explained: What Every Line Item Means
Closing costs typically run 2–5% of the loan amount and include lender fees, third-party fees, prepaid items, and escrow setup. Understanding these helps buyers avoid last-minute surprises.
What You'll Learn
- Origination fees (points, processing, underwriting)
- Third-party fees (appraisal, title, settlement)
- Prepaid items (interest, insurance premium)
- Escrow setup (2 months taxes + insurance)
- Government fees (recording, transfer taxes in some states)
The Full Explanation
CTC Processing reviews the Loan Estimate and Closing Disclosure for accuracy and completeness. Incorrect fee disclosures are a compliance risk — CTC flags discrepancies to the LO before closing.
Frequently Asked Questions
Can closing costs be rolled into the loan?
Typically no — not for purchase transactions. However, seller concessions (seller pays buyer's closing costs) can effectively be 'financed' in the purchase price. On refinances, closing costs can often be rolled in.
What are seller concessions and how much can the seller pay?
Seller concessions are contributions from the seller to the buyer's closing costs. Conventional: 3% (under 10% down) to 9% (over 25% down). FHA: 6%. VA: 4%. USDA: 6%.
Are there ways to reduce closing costs?
Yes — negotiate seller concessions, compare lender fees, ask about lender credits (accepting a higher rate in exchange for credits), and verify every third-party fee is necessary and competitive.