Understanding Closing Costs

What You Need to Know

Buying a home is an exciting milestone, but it comes with more than just your down payment. When you “close” on your home, you’ll also need to pay closing costs—a collection of fees and expenses that make your mortgage official.

What Are Closing Costs?

Closing costs are the one-time charges you’ll pay at the end of the homebuying process, in addition to your down payment. They cover services like the appraisal, title search, and legal work to transfer ownership. In most cases, you can expect these costs to range from 2% to 5% of your home’s purchase price.

For example, on a $300,000 home, closing costs could fall between $6,000 and $15,000. It’s a big number, so it’s smart to budget for it early.

Common Closing Costs

Here are a few of the most typical fees you may see:

Appraisal fee – Confirms the home’s value (around $500–$700).

Title search & title insurance – Ensures no one else has a legal claim to the home (often $1,000–$2,500).

Loan origination fee – Usually about 1% of your loan amount.

Escrow & recording fees – Cover the legal and administrative work to finalize your purchase.

Prepaid costs – Things like homeowners insurance (your first year upfront) and a portion of property taxes.

Your lender will provide a loan estimate early in the process and a closing disclosure before settlement so you’ll know what to expect.

Can You Lower Closing Costs?

Sometimes. You can shop around for services like title insurance, and in certain cases, you may be able to negotiate with the seller to cover part of the costs (called a seller concession). But this often depends on the housing market—sellers are less likely to agree when demand is high.

The Bottom Line

Closing costs can feel overwhelming, but knowing about them early helps you prepare. Always review your closing disclosure carefully, ask questions, and make sure you understand where each dollar is going. That way, there are no surprises on the big day when you finally get the keys in hand.

At Universal 1 Credit Union (U1), our mortgage team is ready to guide you through the homebuying process and answer your questions—including closing costs. We’ll help you feel prepared and confident as you move toward homeownership. Connect with us today by visiting a local office, sending us a message, emailing, or giving us a call. Together, we’ll make your path to a new home simpler, smarter, and more affordable.

mortgageservices@u1cu.org   |  800-762-9555 ext 424  |  NMLS #652486