Why are closing costs so high? What are the biggest buckets that drive them?

Why are my closing costs so high?

You're looking at closing costs that feel higher than expected and want to understand what drives those numbers. Closing costs typically range from 2% to 5% of your loan amount, split between lender fees, third-party services, and prepaid items.

The biggest categories are usually loan origination fees (what the lender charges to process your mortgage), title insurance and escrow services (protecting ownership and handling the transaction), and prepaid expenses like property taxes, homeowners insurance, and mortgage interest. Appraisal fees, credit reports, and recording fees with local government offices add to the total.

Your Loan Estimate breaks down every fee by category—compare Section A (loan costs), Section B (services you cannot shop for), and Section C (services you can shop for) to see where your money goes. You can shop around for title companies, home inspectors, and insurance to potentially reduce some costs.

Share your Loan Estimate with your lender and ask them to walk you through each section. They can explain which fees are set and which ones you can influence through different service providers.