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14 Things Your Mortgage Lender Isn't Telling You About Closing Costs

Uncover the hidden fees your mortgage lender might not mention and learn how to avoid costly surprises at closing.

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Updated Oct. 1, 2024
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When you buy a house that’s $200,000, you might assume that the only cash you need to bring to the table is the down payment. If that’s 20%, then you plan on handing over $40,000 that day.

But the actual amount is higher thanks to closing costs.

These often unexpected costs are part of every home-buying transaction, and navigating these extra expenses can be a complex and confusing process if you’ve never done it before. 

There are fees and percentages to account for, which may not have been part of your initial calculation.

You can prepare yourself financially for them, however, and there are also ways to avoid these expenses. Here’s what you need to know.

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Closing costs may be between 2% and 5%

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Closing costs are not included in the purchase price of your home, and they add up quickly. While 2–5% may not sound like a lot, it can feel significant when you’ve already been saving up carefully for your down payment.

Some mortgage lenders require title insurance

Drazen/Adobe african american man signing insurance contract

Title insurance isn’t required by law, but many mortgage lenders will need it to avoid troubles down the line. This will only run you a few hundred dollars, but you don’t want it to surprise you.

Real estate transfer fees come up when a property changes hands

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You probably feel like you’re paying enough with your down payment, but there are also transfer fees involved in transferring a piece of real estate from one person to another. This fee varies by location, but expect to pay a percentage of the final purchase price.

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You’ll pay for the home appraisal and inspection

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Did you know the buyer pays to have the home inspected to ensure it matches the condition promised in the listing? That will add another several hundred dollars to the fees you pay before closing.

There could be lender and broker fees

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The lender and broker are, of course, going to want to be paid for their work. This could add up to 3% of the purchase price — on top of what you’re already paying.

There may be a loan application fee

goodluz/Adobe woman signing loan agreement with banker

It may seem like just another way to add insult to injury, but it’s also possible that you’ll pay another fee just to apply for a mortgage. Typically, this will run a few hundred dollars.


You’ll pay a loan origination fee

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You’re already paying a loan application fee, and then you’ll pay a loan origination fee. What’s the difference? The loan origination fee is the cost to make the loan — significantly more expensive than the application fee. It’s usually 1–2% of the purchase price.

You might have to hire a lawyer

thodonal/Adobe Estate agent shaking hands with customer

Depending on your location or the complexity of the transaction, you may have to hire a lawyer to review all your contracts. This means paying an hourly legal fee, which can reach into the hundreds.

You’ll pay taxes at closing

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First-time homeowner? Welcome to paying property taxes. You’ll be greeted into that world with two months of property taxes due at closing. 

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Homeowners insurance may be required at closing

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Your mortgage broker will probably require you to get homeowners insurance, which you must have in place by closing. This will likely cost a few hundred dollars per month.

You can negotiate to have the seller pay

fizkes/Adobe african american couple with realtor

There are a few ways to help reduce closing costs, including negotiating to have the seller pay some or all of the costs. Often, this is done through seller credits or asking the seller to pay the broker fee.

Closing at the end of the month can save money

Rawpixel.com/Adobe realtor showing contract to family buying house

If you close at the end of the month, you’ll reduce the number of days you’re accruing interest, which means less money due at closing. Unfortunately, it also means fewer days until your first mortgage payment.


Different lenders will charge different fees and rates

Jacob Lund/Adobe Couple handshaking realtor after signing contract

Most real estate experts will advise you to shop around before committing to a lender. That’s because each lender will charge different fees or come to the table with a different negotiating ability. Pick the one that’s most advantageous for you.

You can wrap the closing costs into the loan

Rido/Adobe Multiethnic couple handshake with real estate agent

If you don’t want to come to the table with the cash for closing costs, consider wrapping them into the loan. However, be aware that you’ll pay interest on those closing costs, just as you will pay interest on your monthly payment towards the principal.

Bottom line

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A major ruling in the real estate world in 2024 changed how commission structures are negotiated.

It’s not entirely clear how this will impact buyers and sellers, but buyers may have more flexibility in the amount they decide to pay their agent — but this will also have to be decided upfront. 

That means fewer surprises along the way and potentially lower closing costs, which is important for homeowners looking to build wealth.

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