What Is Included in Closing Costs?

Closing costs include the fees associated with originating and processing a mortgage loan, according to the Consumer Financial Protection Bureau. The line-item fees that may be included in the category of closing costs can differ from lender to lender, so borrowers often shop around for the best loan terms.

Typically, closing costs can include loan underwriting, loan processing, property appraisal, pest inspection and title recording fees, as noted by the Consumer Financial Protection Bureau. Closing costs can also include title insurance and inspection fees, flood-hazard-determination fees and fees for processing escrow or settlement. Federal laws require lenders to provide borrowers with a detailed accounting of closing costs for a mortgage after a loan application is submitted and again at the time the loan closes.

The composition of closing costs varies based on location and lender. However, Kiplinger notes that closing costs can range from 2 to 3 percent of the property's purchase price up to 5 to 6 percent of the price in high-tax areas. A borrower can try to minimize closing costs by comparing fees from different lenders and selecting certain third-party service providers instead of using the providers selected by the lender. For example, a borrower can try to save money on closing costs by selecting a local pest inspector offering a deal, rather than simply paying a fee to the lender for arranging the service.