What exactly goes into closing costs?

Elevated interest rates and pricier listings have made it even harder to afford a new home. But there is an often-overlooked expense when buying a home: closing costs.

Elevated interest rates and pricier listings have made it even harder to afford a new home. But there is an often-overlooked expense when buying a home: closing costs. These costs, which are the fees owed on the day you finalize the purchase of a home, have risen in recent years. In 2022, the median cost of a loan paid by homebuyers — including origination fees, appraisal and credit report fees, title insurance, discount points and other fees — was $6,000, a nearly 22% increase from 2021, according to a report from the Consumer Financial Protection Bureau. But the calculation for closing costs could soon change: A recent settlement by the National Association of Realtors set to take effect in July could potentially increase these costs for some homebuyers. At the same time, the Biden administration plans to take aim at so-called “junk fees” hidden in closing costs. In a recent report, the CFPB said it would work to “analyze mortgage closing costs, seek public input and, as necessary, issue rules and guidance to improve competition, choice, and affordability.” Here’s what to know about closing costs: Not every buyer pays the same amount in closing costs. The final bill depends on several factors, including which state you live in, taxes, the type of mortgage loan you take out and the overall cost of the home you are buying. Closing costs can include an application fee to process your loan request, home appraisal fees that determine how much the property is worth, a credit reporting fee, title insurance (which protects the buyer from defective property titles) and an origination fee (the price you pay for getting the loan in the first place).