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Understanding Closing Costs: A Buyer’s Checklist

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You’ve found the right home, negotiated an offer and are ready to close. Before you get the keys, there’s one more important piece to plan for: closing costs.

Closing costs are the fees and expenses you pay to finalize your mortgage and officially transfer ownership of the property. They typically range from 2% to 5% of your home’s purchase price, and they cover a mix of lender, legal and administrative services that make your home purchase possible.

Understanding what to expect can help you budget confidently and avoid surprises at the closing table. Here’s a checklist to guide you:

Lender-Related Costs

These fees come directly from your mortgage lender. They include:

  • Loan origination fee: Covers the lender’s processing and administrative work for creating your mortgage.

  • Credit report fee: The cost to pull your credit report and evaluate your financial history.

  • Underwriting fee: Charged for verifying your income, assets and risk as a borrower.

Tip: Ask your lender for a loan estimate early in the process. This document breaks down each expected charge so you can compare lenders and avoid hidden fees.

Title & Legal Fees

These costs ensure the property’s ownership is clear and legally transferred to you. You can expect to pay:

  • Title search & title insurance: Verifies that the seller legally owns the home and protects you (and your lender) from future claims against the property.

  • Attorney fees: In Illinois, closings typically involve an attorney who reviews documents, ensures legal compliance and guides you through the process.

  • Recording fees: Paid to the county to officially record your new deed and mortgage.

Prepaid & Escrow Items

You’ll likely prepay certain ongoing costs at closing, like:

  • Property taxes: Usually prorated between the buyer and seller, depending on when the property changes hands.

  • Homeowner’s insurance: Lenders often require the first year’s premium to be paid at closing.

  • Prepaid interest: Covers interest that accrues from your closing date until your first mortgage payment.

  • Escrow deposits: Funds held by your lender to cover future property tax and insurance payments.

Other Possible Expenses

  • Appraisal fee: Pays for an independent assessment of your home’s value to confirm it meets the lender’s standards.

  • Home inspection: Though not always required by the lender, it’s a smart step to identify potential repairs or safety issues.

  • Transfer taxes: In Chicago, both buyers and sellers may pay a real estate transfer tax when the property changes hands.

Preparing for the Final Step

Before closing day, review your closing disclosure, a detailed summary of all final costs, at least three business days in advance. Compare it with your loan estimate and ask your lender or attorney to explain any differences.

If funds are due, your lender or attorney will let you know how much to bring to the closing table (usually by wire transfer or cashier’s check).

Buying a home is one of the biggest investments you’ll ever make — and knowing what to expect at closing helps you start your homeownership journey on the right foot.

A Closer Look At Closing Costs

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Closing costs are a one time payment that is made on your home on the day the sale closes. However, not all closing costs are created equal. Some are negotiable, while others are set in stone. Here is what you need to know about them.

Overview of Closing Costs

Closing costs, in short, is the money you must pay when you buy a house. These fees for a home can vary depending on the price and type of home you are purchasing. They cover every expense associated with buying a house — from legal fees to property taxes to an inspection.  

There are several costs that you should budget for if you’re planning on buying a home.

Common Closing Costs

  • Loan Application Fee
  • Appraisal Costs
  • Attorney Fee
  • Closing Fee
  • Credit Reporting Fee
  • Escrow Funds
  • Homeowner’s Insurance
  • Loan Origination Fee
  • Title Insurance
  • Property Taxes
  • Transfer Tax
  • Underwriting Fee

Depending on how much money you’re putting toward a down payment, the type of mortgage, the type of home, the location of the home and other considerations, you may end up having to other additional fees.

Budgeting for Closing Costs

In general, closing costs are typically between 2% and 5% of the property’s purchase price. For example, if you are purchasing a home for $300,000, your costs could range from $6,000 to $15,000.  However, it is important to keep in mind that this is just a rough estimate, and the actual amount you pay could be higher or lower depending on a variety of factors.   

To determine how much you will have to pay, you should work closely with your lender and REALTOR®. They can help you understand the various fees associated with purchasing a home and provide you with a detailed list of anticipated costs. You can ask your lender for a loan estimate, which provides a similar breakdown of costs but also includes information about the terms of the mortgage.  

Budgeting for closing costs is an important part of the homebuying process. To prepare for these costs, you may want to set aside a specific amount of money in a savings account. You may also be able to negotiate with the seller or lender to reduce the closing costs, although this may not be possible in all cases.  

Ensure that you review all costs before signing the final purchase agreement to understand all the fees involved. By being prepared and budgeting for these fees, you can make the homebuying process as smooth and stress-free as possible.