When you think about buying your first home, your focus is likely on the down payment — but that’s only part of what you’ll need to bring to the table. Closing costs are a major part of the equation and often catch first-time homebuyers off guard.
This guide from Bootcamp For Buyers will walk you through what closing costs are, how much they typically cost, and how you can prepare (and even reduce) them.
What Are Closing Costs?
Closing costs are one-time fees paid at the end of the home buying process — when you officially close on the home and take ownership. These fees cover everything from the appraisal to the title search to loan origination.
How Much Are Closing Costs?
Closing costs typically range from 2% to 5% of the home’s purchase price.
- On a $250,000 home, that’s between $5,000 and $12,500.
- The average for first-time buyers is usually around 3.5%.
That’s in addition to your down payment — which is why many buyers are surprised at how much they actually need to close.
Common Closing Costs You’ll See
- Loan Origination Fee: Charged by your lender for processing your loan (usually 0.5–1% of the loan)
- Appraisal Fee: Required by lenders to determine the home’s value (typically $400–$600)
- Credit Report Fee: Small fee for pulling your credit history
- Title Search & Insurance: Ensures the seller has the right to sell the home and protects you against disputes
- Recording Fees: Paid to the local government to record the deed and transaction
- Underwriting Fees: Related to loan approval and risk assessment
- Attorney or Escrow Fees: Varies by state — may include document prep, disbursement, and legal review
- Prepaid Taxes and Insurance: Lenders often require you to prepay property taxes and homeowners insurance into an escrow account
What About Down Payment Assistance?
Many down payment assistance (DPA) programs also offer help with closing costs. Some provide:
- Grants or forgivable loans
- Deferred-payment second mortgages
- Credits that reduce your out-of-pocket closing costs
Not all lenders accept all DPA programs, so check early and talk to a DPA-friendly lender recommended by Bootcamp For Buyers.
How to Reduce Closing Costs
You have more control than you might think. Here are some tips to bring those costs down:
- Ask the Seller to Contribute: In a buyer’s market, sellers may offer to cover part or all of your closing costs.
- Shop Around for Services: You can often choose your own title company, insurance provider, and inspector — and prices vary.
- Ask Your Lender About Credits: Some lenders offer closing cost credits in exchange for a slightly higher interest rate.
- Use Local Programs: City, county, or state housing agencies may have programs that reduce fees or provide credits.
Will I Get an Estimate Beforehand?
Yes. Your lender will provide a Loan Estimate (within 3 days of application) and a Closing Disclosure (at least 3 days before closing). These documents outline exactly what you’ll owe and where every dollar is going.
Tip: Review these closely and ask questions. Even small changes in lender fees or insurance can make a big difference.
Closing Cost Example
Here’s a breakdown of sample closing costs on a $300,000 home:
- Loan Origination Fee: $2,250
- Appraisal: $500
- Title Insurance & Search: $1,200
- Recording & Attorney Fees: $800
- Prepaid Taxes/Insurance: $2,500
- Total Closing Costs: $7,250
Can I Roll Closing Costs Into My Loan?
Sometimes. You can’t typically roll them into a traditional purchase mortgage, but some loan programs allow lender-paid credits or closing cost assistance that effectively wraps them into the deal.
FHA loans, VA loans, and USDA loans all offer flexibility here — which is why they’re so popular among first-time buyers.
Conclusion: Prepare Early, Save More
Closing costs are a normal — but often misunderstood — part of buying your first home. With a little education and planning, you can:
- Budget more accurately
- Use programs to reduce your costs
- Negotiate smarter with sellers and lenders