Get Expert Financing
- Matched with investor-friendly lenders
- Fast pre-approvals-no W2s required
- Financing options fro rentals, BRRRR, STRs
- Scale your portfolio with confidence
Buying a home with a conventional loan? Congratulations! But before you start decorating, it’s important to understand one of the most overlooked parts of the mortgage process: closing costs. These fees can catch you off guard if you’re not prepared. In this article, we’ll explain what conventional loan closing costs include, how much you can expect to pay, and how to potentially lower them.
What Are Closing Costs?
Closing costs are the fees and expenses paid at the end of the mortgage process, during the final step of a real estate transaction. They cover everything from lender fees to third-party services and typically amount to 2% to 5% of the home’s purchase price.
Key Characteristics:
- Paid at the “closing” of the loan.
- Can sometimes be rolled into the mortgage.
- Amount depends on location, loan amount, lender, and service providers.
Breakdown of Conventional Loan Closing Costs
Here’s a complete overview of typical fees associated with conventional loans:
1. Loan Origination Fee
This is the fee charged by your lender to process the loan application. It’s usually around 0.5% to 1% of the loan amount.
Tip: Some lenders may waive this fee during promotions. Always ask!
2. Appraisal Fee
Lenders require a professional home appraisal to determine the market value of the property. This typically costs $300–$500.
3. Credit Report Fee
Your lender will pull your credit history to assess your creditworthiness. This costs around $25–$50.
4. Title Insurance and Title Search Fees
A title search ensures the property has no legal claims or liens. Title insurance protects the lender and/or buyer against title-related issues. Expect to pay $500–$1,000.
5. Underwriting Fee
Charged by the lender for evaluating and verifying loan documents, this is usually $400–$600.
6. Escrow Fees
These are third-party fees for managing the closing process and funds. Costs vary widely by state but usually range from $500–$2,000.
7. Recording Fees
Paid to the local government for recording the new home title. These range from $25 to $250 depending on the locality.
8. Homeowners Insurance
Lenders typically require the first year’s premium to be paid upfront. This can range from $500–$1,500 annually.
9. Property Taxes
You may need to prepay a few months’ worth of property taxes into an escrow account. This depends on your local tax rate.
10. Private Mortgage Insurance (PMI)
If your down payment is less than 20%, you’ll likely pay PMI. Some of this may be included in closing costs upfront.
How Much Are Closing Costs on a $300,000 Home?
| Home Price | Estimated Closing Costs (2–5%) |
| $300,000 | $6,000 – $15,000 |
The total depends on your lender, state, and service providers. Shopping around can significantly impact your bottom line.
How to Reduce Closing Costs
Looking to save? Here are some ways to reduce conventional loan closing costs:
- Shop lenders: Get quotes from at least 3 different lenders.
- Negotiate fees: Some fees are flexible, especially origination and processing fees.
- Ask for lender credits: In exchange for a slightly higher interest rate, lenders may offer credits toward closing costs.
- Consider seller concessions: You can negotiate with the seller to cover part or all of your closing costs.
Want help comparing lenders? Learn how to choose the right mortgage lender.
FAQs About Conventional Loan Closing Costs
Can I roll my closing costs into my conventional loan?
Yes, in some cases. This depends on your lender and the type of refinance (if applicable), but it generally increases your loan balance.
Are closing costs tax deductible?
Some closing costs, like mortgage interest and property taxes, may be tax-deductible. Speak to a tax professional for specific advice.
Do first-time homebuyers get any discounts on closing costs?
Some lenders or government programs offer incentives. Check with your lender or look into first-time homebuyer programs.
Read Next: Helpful Homebuying Resources
- Top-Rated Online Mortgage Lenders: What to Look For
- Bank Statement Loan Credit Score What Lenders Look For
Get Expert Financing
- Matched with investor-friendly lenders
- Fast pre-approvals-no W2s required
- Financing options fro rentals, BRRRR, STRs
- Scale your portfolio with confidence
Our advice is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.
