Definition
Fees and charges paid when a home loan is finalized, such as lender fees, appraisal, title insurance, recording fees and prepaid items.
What it means
Closing costs are the expenses of completing a real estate purchase or refinance beyond the down payment. They include lender charges such as origination fees and points, third-party services such as the appraisal, credit report, title search and title insurance, government recording fees and transfer taxes, and prepaid items such as homeowners insurance, interest and escrow deposits. Totals often run a few percent of the loan amount and vary by state. Your Loan Estimate lists expected closing costs within three business days of applying, and the CFPB encourages comparing estimates from several lenders. The Closing Disclosure shows final numbers at least three business days before closing. Sellers sometimes agree to pay part of a buyer's costs, and some programs help first-time buyers.
Example
On a $300,000 loan, closing costs of 3% are about $9,000. A lender credit of $3,000 in exchange for a slightly higher rate would lower the cash needed at closing to about $6,000.
Illustrative numbers only. Your situation will differ.