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What are closing costs?

Closing on a new home is the last step in the mortgage loan process. With closing finalized, you’ll be handed the keys to your new home! In addition to your down payment, you’ll need additional funds to cover costs related to closing. Don’t let these fees and expenses catch you off guard. Here’s a quick guide to what closing costs are, what’s included in closing costs and how closing costs can be included in your mortgage.

Mortgage closing costs definition

Also known as settlement costs, closing costs are defined as expenses related to obtaining a mortgage loan and closing a home purchase or refinance. They’re separate from the sale price of the property.

What’s included in closing costs?

Defining what’s included in closing costs can be tricky because they vary by lender and mortgage type. They also depend on the real estate agent you’re using to purchase your home and your home’s location. While the actual expenses aren’t the same for all home purchases, there are some standard recurring payments and one-time fees.

Recurring payments

  • Property taxes:

    A tax assessed on your property by your local or municipal government. After closing your loan, you may be eligible for a property tax exemption or discount. Contact your county for more information.

  • Homeowner’s insurance:

    Generally, insurance coverage to protect your property against losses and damage.

One-time expenses

  • Origination fee:

    A fee charged by the lender to cover the costs of making the loan.

  • Discount points:

    Pre-paid interest charges on your loan. The more points you pay, the lower the interest rate on the loan and vice versa. Borrowers typically can pay anywhere from 0 to 3 or 4 points, depending on how much they want to lower their rates.

  • Appraisal fee:

    The fee charged by a licensed or certified appraiser to assess your home’s market value. Appraisals are used to determine if a home’s sale price and the borrower’s requested loan amount are appropriate. The appraisal report is a required part of the mortgage loan process and is essential for buyers and sellers.

  • Processing fee:

    Charged to a potential borrower for processing a loan application.

  • Other common fees:

    Underwriting fees, settlement agent fees, title fees and recording fees.

Are closing costs included in a mortgage loan?

Depending on the loan program you choose, you may have the option of including your closing costs in your mortgage loan if you are refinancing. By rolling closing costs into a refinance, you can include these expenses into the total loan amount. While this may help you lower the cash needed at closing, paying closing costs upfront can save money in the long run.

How much are closing costs?

Closing costs will typically be in the range of 2-5% of the home value. With the free Guild cash-to-close calculator, you can estimate how much money is needed to close your real estate purchase.

After submitting a loan application, Guild is required to provide a Loan Estimate, which will give you a good idea of your expected closing costs.

Who pays closing costs?

Typically, a homebuyer should expect to pay fees related to their mortgage loan. However, along with negotiating a home’s sale price, you and the seller can negotiate who pays closing costs. Seller concessions involve the seller picking up some of the buyer’s closing costs to make the property more attractive to the buyer.

Guild has innovative service-level guarantees that give homebuyers peace of mind about their earnest money and closing date. Credit Approval Protection (CAP)* gives buyers, agents and sellers added confidence in Guild’s pre-approval process. If the company issues a preliminary underwriting credit approval but is unable to close the homebuyer’s transaction, Guild will pay up to $1,000 for inspections, appraisals or relocation expenses incurred for the home purchase. The company will also reimburse up to $5,000 in earnest money deposits if Guild is unable to close the loan. Under Homebuyer Express* with 17 Day Closing Guarantee, Guild will pay qualifying customers $500 toward closing costs if delays solely by the company prevent the loan from closing on time, in 17 days or more. Strengthen your offer by incorporating information about this added protection in your offer letter.

*For full terms and conditions, visit:

The above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply.

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About the Author: Guild Mortgage

Founded in 1960 when the modern U.S. mortgage industry was just forming, Guild Mortgage Company is a nationally recognized independent mortgage lender providing residential mortgage products and local in-house origination and servicing. Guild’s collaborative culture and commitment to diversity and inclusion enable it to deliver a personalized experience for each customer. With more than 4,000 employees and over 250 retail branches, Guild has relationships with credit unions, community banks, and other financial institutions and services loans in 49 states and the District of Columbia. Guild’s highly trained loan professionals are experienced in government-sponsored programs such as FHA, VA, USDA, down payment assistance programs and other specialized loan programs. Guild Mortgage Company is a wholly owned subsidiary of Guild Holdings Company, whose shares of Class A common stock trade on the New York Stock Exchange under the symbol GHLD.