What Are Closing Costs? A Deep Dive for Homebuyers

When you’re buying a home, most of your focus naturally falls on the down payment. That makes sense—it’s a big chunk of money, and it often determines your loan amount. But there’s another key piece of the puzzle that too many buyers overlook until the last minute: closing costs.

Let’s break this down. What are closing costs, what do they include, and how can you prepare?

What Are Closing Costs?

Closing costs are the various fees and expenses that must be paid when a real estate transaction is finalized—aka, at “closing.” These costs are in addition to your down payment, and they can add up quickly if you’re not expecting them.

Think of it this way: a lot of people and processes are involved in getting a mortgage and transferring property ownership. Closing costs help cover the services that make that all happen.

What Do Closing Costs Include?

Closing costs vary depending on your location, lender, and the specifics of your transaction, but here are some common items you’ll likely see:

1. Appraisal Fee

Before your lender gives the green light on a loan, they’ll want to verify the home’s value. An appraiser is hired to assess the property and ensure the home is worth what you’re offering. This fee typically ranges a few hundred dollars depending on the property and region.

2. Title Insurance

This protects both you and your lender from potential legal disputes over the property’s ownership. Title companies research the home’s ownership history to ensure no one else can claim rights to it.

3. Loan Origination Fee

This is charged by the lender for processing your loan application. It often covers underwriting, document preparation, and other administrative costs.

4. Credit Report Fee

Your lender will pull your credit report to assess your ability to repay the loan. There’s usually a small fee associated with this.

5. Escrow Fees

In some states, escrow companies manage the closing process and hold funds until everything is finalized. Their fees are part of your closing costs.

6. Recording Fees

Local governments charge a fee to record the property transfer in public records. It’s a simple but necessary part of making your purchase official.

7. Prepaid Costs

This includes things like property taxes, homeowners insurance, and interest that will accrue between your closing date and your first mortgage payment.

How Much Are Closing Costs?

While it depends on your loan size, property location, and lender, a general estimate is that closing costs may range from 2% to 5% of your loan amount. That means if you’re buying a $350,000 home, your closing costs could be several thousand dollars on top of your down payment.

The actual amount will be detailed in your Loan Estimate and Closing Disclosure—two important documents you’ll receive during the process. Don’t ignore them. Review them carefully and ask questions if anything seems unclear.

Can You Reduce or Offset Closing Costs?

Sometimes, yes.

Some buyers negotiate with the seller to cover a portion of the costs—this is called a seller concession. There are also certain loan programs that may allow for reduced fees or offer credits toward closing costs. In some cases, lenders offer credits in exchange for a slightly higher interest rate. It’s all about trade-offs, and it really depends on your situation.

This is one of those moments where working with an experienced loan officer really matters. We can walk you through your options, help you compare scenarios, and make sure you’re financially ready for what’s ahead.

Why Closing Costs Matter

Too many buyers spend months saving for a down payment but forget to budget for closing costs. That can lead to surprises—or worse, delays—right before closing.

Being prepared means fewer headaches, smoother closings, and more confidence. And really, isn’t that what you want when you’re making one of the biggest purchases of your life?

Final Thought

If you’re in the early stages of home shopping or pre-qualifying for a loan, don’t just focus on the down payment. Ask about closing costs. Build them into your budget. And if you’re not sure where to start, let’s connect—A Ruoff loan officer is happy to walk you through it.

Knowledge makes a smoother homebuying journey. Let’s make sure you're ready for every part of it.

About Ruoff Mortgage

At Ruoff Mortgage, we understand that buying a home is one of life’s biggest moments – not just as a financial decision, but a personal one. For more than 41 years, we’ve proudly helped families turn their dreams into reality. From our roots in northeast Indiana to now serving homebuyers throughout the Midwest, our focus has stayed the same: delivering exceptional service rooted in care, speed, and community. With an average 15-day clear-to-close time, our team is here to make your journey to homeownership as smooth and stress-free as possible. When you're ready to take the next step, we’re here to walk with you, every step of the way.