Guides / Mortgages and home
Closing costs and the Loan Estimate
Closing costs often add up to roughly 2% to 5% of the loan amount. Two standard forms make them easier to compare, if you know what to look for.
The key ideas
- Loan Estimate
- Lenders must give you this three-page form within three business days of receiving your application. Getting estimates from several lenders on the same day lets you compare them side by side.
- Closing Disclosure
- You must receive this at least three business days before closing. Compare it line by line with your Loan Estimate and ask about anything that changed.
- Points
- Discount points are fees paid up front to lower your rate. One point usually equals 1% of the loan amount. They pay off only if you keep the loan long enough.
- Services you can shop for
- The Loan Estimate lists services you're allowed to shop for, such as title services or a pest inspection. Shopping these can save money.
- Rate lock
- A rate lock holds your interest rate for a set period. Ask how long it lasts and what happens if closing is delayed.
Questions to ask yourself
- Which fees on the Loan Estimate can change before closing, and by how much?
- Is the seller willing to contribute toward closing costs?
- How many months would it take for paying points to break even?
Free help
- CFPB closing checklist
- A checklist and explanation of the Closing Disclosure at consumerfinance.gov.
- FBI IC3
- Report wire fraud immediately to your bank and at ic3.gov.
This guide is general education for US households, based on how things typically work. Rules, rates and program details change and vary by lender and state. It is not individual financial, legal or tax advice, and it isn't an offer of credit. Pennies & More isn't paid by any lender or company mentioned here.