Closing Costs Mortgage Questions

Explore sample Closing Costs questions and educational explanations from the RatesQ team.

• What are typical closing costs on a $400,000 home?

  My lender gave me a Loan Estimate with $11,200 in closing costs on a $400k purchase. That seems high. Is that normal? What's actually in there and can any of it be negotiated?

  $11,200 is about 2.8% which is within the normal range. The breakdown matters though. Look at the Loan Estimate carefully: Section A is lender fees (origination, processing, underwriting) — these are negotiable. Section C is title and settlement fees — some of these you can shop for. Section E is prepaid items (homeowner's insurance upfront, prepaid interest, initial escrow setup) — these aren't really fees, you'd pay them regardless. What are the big line items on yours?

  Normal range is 2–4% in most states, higher in some (NY and NJ have higher transfer taxes, for example). On your $400k loan: get 2-3 more Loan Estimates and specifically compare Section A (lender fees) and Section C (settlement fees). Title insurance in Section C is often shoppable — you can choose your own title company. Some sellers will also contribute to buyer closing costs as part of negotiations. Seller concessions of 2–3% are common in some markets. Ask your real estate agent if that's realistic in your area.

  Also remember the prepaids (escrow setup, prepaid interest, first year insurance) aren't going to the lender — they're just money that would have been due anyway. When comparing lenders, focus on Section A and C costs plus the interest rate together.

• Can I negotiate closing costs or roll them into the loan?

  I'm a first-time buyer and the closing costs on my Loan Estimate seem really high. Can I ask the lender to reduce them? And is rolling them into the loan really 'free'?

  Rolling them in isn't free — it means you're financing the closing costs at your mortgage rate for 30 years. On $8,000 at 7% for 30 years, you're paying about $19,000 total (the $8k plus interest). Whether that's worth it depends on your cash flow situation, but it's not 'free.' The other option is lender credits — you accept a slightly higher rate (say 7.125% instead of 7%) and the lender offsets some of your closing costs. Same idea, but you don't add to the loan balance.

  On negotiation: lender fees are definitely negotiable, especially if you have competing quotes. Showing a lender a better offer from a competitor often results in a match or reduction. Third-party fees (title, escrow, attorney) are harder to negotiate with the lender directly since they're not keeping those fees — but you can sometimes shop your own title company (look at Section C of the Loan Estimate, which items say 'you can shop'). Government fees (recording, transfer taxes) are set by law and can't be reduced. The most effective negotiation tool is getting multiple Loan Estimates before choosing.