Closing costs represent the various fees and expenses that home buyers must pay when finalizing a real estate transaction. These costs typically range from 2% to 5% of the home's purchase price for buyers, meaning a $400,000 home could incur $8,000 to $20,000 in closing costs.

Lender fees include loan origination (0.5-1% of loan amount), application fees, optional discount points (1% per point, reducing rate by ~0.25%), and underwriting fees. Third-party services include appraisal ($300-$600), home inspection ($300-$500), title search and insurance ($500-$2,500), and surveys ($350-$500).

Government fees include recording fees ($50-$250) and transfer taxes (0.5-2% of purchase price). Prepaid items include first year homeowners insurance, property tax prepayments, mortgage interest, and initial escrow deposits (2-3 months of taxes and insurance).

Some costs are negotiable through lender shopping, seller concessions in buyer's markets, title insurance comparison shopping, and first-time homebuyer assistance programs.